Question

PARROTHEAD ENTERPRISES 2017 and 2018 Partial Balance Sheets Assets Liabilities and Owners’ Equity 2017 2018 2017 2018 Current assets $ 1,224 $ 1,331 Current liabilities $ 503 $ 559 Net fixed assets 4,994 6,021 Long-term debt 2,661 2,831 PARROTHEAD ENTERPRISES 2018 Income Statement Sales $ 15,442 Costs 7,162 Depreciation 1,381 Interest paid 400 a. What is owners' equity for 2017 and 2018? (Do not round intermediate calculations.) b. What is the change in net working capital for 2018? (Do not round intermediate calculations.) c-1. In 2018, Parrothead Enterprises purchased $2,532 in new fixed assets. How much in fixed assets did Parrothead Enterprises sell? (Do not round intermediate calculations.) c-2. In 2018, Parrothead Enterprises purchased $2,532 in new fixed assets. What is the cash flow from assets for the year? The tax rate is 23 percent. (Do not round intermediate calculations.) d-1. During 2018, Parrothead Enterprises raised $519 in new long-term debt. How much long-term debt must Parrothead Enterprises have paid off during the year? (Do not round intermediate calculations.) d-2. During 2018, Parrothead Enterprises raised $519 in new long-term debt. What is the cash flow to creditors? (Do not round intermediate calculations.)

Answer 1

a)

	2017	2018
Current asset	1224	1331
Net fixed asset	4994	6021
Total asset [A]	6218	7352
Liabilities
Current liabilities	503	559
Long-term debt	2661	2831
Total liabilities [B]	3164	3390
Total equity [A-B]	3054	3962

b)

Working capital =Current asset -current liabilities

2017=1224-503 = 721

2018 = 1331-559=772

change in working capital = 772- 721 = 51

c-1)Fixed asset sold =Beginning Net fixed asset + Purchase- Depreciation - Ending fixed asset

     = 4994+2532-1381-6021

     = 124

c-2)Net capital spending= Ending Net fixed asset +depreciation- beginning Net fixed asset

             = 6021 +1381 -4994

              = 2408

operating cash flow =EBIT +depreciation-tax

                 = 6899+1381 -1494.77

                    = 6785.23

sales	15442
less:cost	(7162)
Depreciation	(1381)
Income before interest and tax	6899
less:Interest	(400)
Income before tax	6499
less:Income tax expense (6499*.23)	(1494.77)
Net income	5004.23

cash flow from asset = OCF-Net capital spending -net change in working capital

            = 6785.23-2408- 51

           = 4326.23

d-1)Debt paid off = Beginning long term debt + raised- ending long term debt

             =2661+519-2831.

             = 349

d-2)

cash flow to creditors = Interest paid -[ending long term debt -beginning long term debt]

        = 400- [2831-2661]

       = 400 - 170

      = 230