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Cascade Company was started on January 1, Year 1, when it acquired $167,000 cash from the owners. During Year 1, the company earned cash revenues of $94,600 and incurred cash expenses of $66,500. The company also paid cash distributions of $13,000. Required Prepare a Year 1 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions. (Consider each assumption separately.) Problem 8-20A (Algo) Part c Cascade is a corporation. It issued 10,000 shares of $10 par common stock for $167,000 cash to start the business.

Fundamentals of Financial Management (MindTap Course List)

Fundamentals of Financial Management (MindTap Course List)

15th Edition

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 14P: FREE CASH FLOW Arlington Corporation's financial statements (dollars and shares are in millions) are...

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Problem 8-20A (Algo) Effect of business structure on financial statements LO 8-1

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Cascade Company was started on January 1, Year 1, when it acquired $167,000 cash from the owners. During Year 1, the company earned cash revenues of $94,600 and incurred cash expenses of $66,500. The company also paid cash distributions of $13,000.

Required

Prepare a Year 1 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions. (Consider each assumption separately.)

Problem 8-20A (Algo) Part c

Cascade is a corporation. It issued 10,000 shares of $10 par common stock for $167,000 cash to start the business.

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MASTERY PROBLEM Financial statements for Peachfield Corporation as well as additional information relevant to cash flows during the period follow. Additional information: 1. Office equipment was sold during the year for 75,000. 2. Depreciation expense for the year was 62,400 as follows: 3. No other equipment was sold during the year. The following purchases were made for cash. 4. Declared and paid cash dividends of 20,000. 5. Issued 11,200 shares of 10 par common stock for 118,000. 6. Issued a note payable for 10,700. 7. Additional store equipment was acquired by issuing a long-term note payable for 20,000. REQUIRED 1. Prepare a statement of cash flows explaining the change in cash and cash equivalents. 2. Reconcile cash and cash equivalents at the bottom of the statement of cash flows.
Dillip Lachgar is the president and majority shareholder of Argon Inc., a small retail chain store. Recently, Dillip submitted a loan application for Argon Inc. to Compound Bank. It called for a 600,000, 9%, 10-year loan to help finance the construction of a building and the purchase of store equipment, costing a total of 750,000. This will enable Argon Inc. to open a store in the town of Compound. Land for this purpose was acquired last year. The bank's loan officer requested a statement of cash flows in addition to the most recent income statement, balance sheet, and retained earnings statement that Dillip had submitted with the loan application. As a close family friend, Dillip asked you to prepare a statement of cash flows. From the records provided, you prepared the following statement: Argon Inc. Statement of Cash Flows For the Year Ended December 31, 20Y7 Cash flows from operating activities: Net income.................................................... 300,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation................................................ 84,000 Gain on sale of investments.................................. (30,000) Changes in current operating assets and liabilities: Decrease in accounts receivable............................ 21,000 Increase in inventories..................................... (42,000) Increase in accounts payable............................... 30,000 Decrease in accrued expenses payable...................... (6,000) Net cash flow from operating activities.......................... 357,000 Cash flows from (used for) investing activities: Cash from investments sold..................................... 180,000 Cash used for purchase of store equipment..................... (120,000) Net cash flow from investing activities........................... 60,000 Cash flows from (used for) financing activities: Cash used for dividends........................................ (126,000) Net cash flow used for financing activities........................ (126,000) Increase (decrease) in cash......................................... 291,000 Cash at the beginning of the year................................... 108,000 Cash at the end of the year......................................... 399,000 After reviewing the statement, Dillip telephoned you and commented, Are you sure this statement is right?" Dillip then raised the following questions: 1. How can depreciation be a cash flow?" 2. Issuing common stock for the land is listed in a separate schedule. This transaction has nothing to do with cash! Shouldn't this transaction be eliminated from the statement?" 3. How can the gain on the sale of investments be a deduction from net income in determining the cash flow from operating activities? 4. Why does the bank need this statement anyway? They can compute the increase in cash from the balance sheets for the last two years." After jotting down Dillip's questions, you assured him that this statement was right." But to alleviate Dillip's concern, you arranged a meeting for the following day. a. How would you respond to each of Dillip's questions? b. Do you think that the statement of cash flows enhances the chances of Argon Inc. receiving the loan? Discuss.
FREE CASH FLOW Arlington Corporation's financial statements (dollars and shares are in millions) are provided here. Balance Sheets as of December 31 2018 2017 Assets Cash and equivalents 15,000 14,000 Accounts receivable 35,000 30,000 Inventories 33,320 27,000 Total current assets 83,320 71,000 Net plant and equipment 48,000 46,000 Total assets 131,320 117,000 Liabilities and Equity Accounts payable 10,100 9,000 Accruals 8,000 6,000 Notes payable 7,000 5,050 Total current liabilities 25,100 20,050 Long term bonds 20,000 20,000 Total liabilities 45,100 40,050 Common stock(4,000 shares) 40,000 40,000 Retained earnings 46,220 36,950 Common equity 86,220 76,950 Total liabilities and equity 131,320 117,000 Income Statement for Year Ending December 31, 2018 Sales 210,000 Operating cost excluding depreciation and amortization 160,00 EBITDA 50,000 Depreciation and amortization 6000 EBIT 44,000 interest 5,350 EBT 5,38,650 Taxes (40%) 15,460 Net income 23,190 Dividends paid 13,920 a. What was net operating working capital for 2017 and 2018? Assume that all cash is excess cash; i.e., this cash is not needed for operating purposes. b. What was .Arlingtons 2018 free cash flow? c. Construct Arlingtons 2018 statement of stockholders equity. d. What was Arlingtons 2018 EVA? Assume that its after tax cost of capital is 10%. e. What was Arlingtons MVA at year-end 2018? Assume that its stock price at December 31, 2018? Was 25.

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