ew History Bookmarks People Window Help y Welcom x connectmh

ew History Bookmarks People Window Help y Welcom x connect.mheducation.com/flow/connect.html Connect Saved WESTON ENTERPRISES 2016 and 2017 Partial Balance Sheets Assets Liabilities and Owners\' Equity 2016 2017 2017 365 413 2,000 2,132 2016 Current assets Net fixed assets $ 920 $1,005 Current liabilities 3,857 4,548Long-term debt WESTON ENTERPRISES 2017 Income Statement Sales Costs Depreciation Interest paid $11,500 5,510 1,010 180 a. What was owners\' equity for 2016 and 2017? (Do not round intermediate calculations.) Owners\' equity 2016 owners\' equity 2017 3,008

Solution

c-1.

Ending fixed assets = Beginning fixed assets + Assets purchased – Depreciation - Assets sold

$4,548 = $3,857 + $1,810 – $1,010 - Assets sold

Assets sold = $3,857 + $1,810 - $1,010 - $4,548 = $109

c-2.

Increase in current assets = $1,005 - $920 = $85

Increase in current liabilities = $413-$365 = $48

Net working capital investment = Increase in current assets – Increase in current liabilities = $85 - $48 = $37

Net capital investment = Assets purchased – Assets sold = $1,810 - $109 = $1,701

Income before taxes = Sales – Costs – Depreciation – Interest paid = $11,500 - $5,510 - $1,010 - $180 = $4,800

Net income after taxes = $4,800 * (1 – 0.35) = $3,120

Cash flow from assets = Net income – Net working capital investment – Net capital investment = $3,120 - $37 - $1,701 = $1,382

d-1.

Debt retired = Ending long term debt + Debt issued – Beginning long term debt

Debt retired = $2,132 + $360 - $2,000 = $492

d-2.

Net Cash flow to trade creditors = Ending current liabilities + Costs – Beginning current liabilities = $413 + $5,510 - $365 = $5,558

Net Cash flows to debt = Debt raised – Debt retired = $360 - $492 = -$132

Cash flow to creditors = $5,558 + $132 = $5,690