INCOME STATEMENT: 2016 2017 Sales $100,000.00 $120,300.00 Cost of Goods Sold $60,000.00 $72,180.00 Gross Margin $40,000.00...

INCOME STATEMENT:

	2016	2017
Sales	$100,000.00	$120,300.00
Cost of Goods Sold	$60,000.00	$72,180.00
Gross Margin	$40,000.00	$48,120.00
Depreciation	$16,000.00	$19,200.00
Administrative Costs	$9,000.00	$10,800.00
EBIT	$15,000.00	$18,120.00
Interest	$4,000.00	$4,000.00
Pre-tax income	$11,000.00	$14,120.00
Taxes	$4,400.00	$5,648.00
Net Income	$6,600.00	$8,472.00
Dividends	$0.00	$5,083.20
Addition to Retained Earnings	$6,600.00	$3,388.80

BALANCE SHEET AS OF 12/31/2017:

ASSETS	2016	2017
Cash	$5,000.00	$6,000.00
Inventory	$15,000.00	$18,000.00
Accounts Receivable	$15,000.00	$18,045.00
Current Assets	$35,000.00	$42,045.00
Net PPE	$80,000.00	$92,000.00
Total Assets (TA)	$115,000.00	$134,045.00

LIABILITIES & SHAREHOLDER EQUITY	2016	2017
Accounts Payable	$25,000.00	$30,000.00
Current Liabilities	$25,000.00	$30,000.00
Long Term Debt	$40,000.00	$50,656.20
Total Liabilities	$65,000.00	$80,656.20
Shareholder Equity	$50,000.00	$53,388.80
Total Liabilities and Shareholder Equity	$115,000.00	$134,045.00

1. A) What is the net cash used in investing activities in 2017? (Refer to the Statement of Cash Flows)

B) What is the net cash provided from financing activities in 2017? (Refer to the Statement of Cash Flows)

C) What is the net increase in cash and marketable securities for 2017? (Refer to the Statement of Cash Flows)

2. A) What is the final value for cash and marketable securities at the end of 2017?

Solutions

Expert Solution

1 (A) In investing activities, we will check whether cash has been invested by looking at the balance sheet. In 2016, Net PPE was $80000, in 2017 net PPE was $92000.It means that $12000 i.e. ($92000 - $80000), has been used to acquire the assets.

There is no other asset acquisition in 2017. So, net cash used in investing activities in 2017 is $12000.

(B) For financing activities, we will look at the balance sheet to find out whether there is any debt increase or capital provided.

Increase in long term debt : $50656.2 - $40000 = $10656.2

Increase in shareholder's equity: $53388.8 - $50000 = $3388.8

So, cash flow from financing activities will be:

Increase in long term debt $10656.2

Increase in shareholder's equity $3388.8

Less: Dividends paid ($5083.2)

Cash from financing activities $8961.8

(C) Cash balance in 2017 = $6000

Cash balance in 2016 = $5000

Net increase in cash balance = $6000 - $5000 = $1000

Marketable securities are not given in the question.

2 (A) Final value of cash in 2017 is $6000. Marketable securities are not given in the question.

jeff jeffy answered 1 year ago

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