HOMEWORK 1 You Just Bought An Annuity With 9 Annual P 13. S You Just Bought An v

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HOMEWORK 1 You Just Bought An Annuity With 9 Annual P 13. S You Just Bought An value 1.00 points Problem 2-22 Calculating Cash Flows [LO 4] Consider the following abbreviated financial statements for Cabo Wabo, Inc: CABO WABO, INC. Partial Balance Sheets as of December 31, 2015 and 2016 2015 16 Assets Liabilities and Owners' Equity Current assets Net fixed assets $ 2,801 $ 2,926 Current liabilities s 1,083 $ 1,640 6,518 7,794 2,593 13,138 Long-term debt O WABO, 2016 Income Statement Sales Costs Depreciation Interest paid $40,210 20,130 3,486 675 a. What is owners' equity for 2015 and 2016? (Do not round intermediate calculations and round your answers to the nea number, e.g., 32.) Owners' equity 2015 2016 b. What is the change in net working capital for 2016? (A negative answer should be indicated by a minus sign. Do not rour calculations and round your answer to the nearest whole number, o.g., 32.) Change in net working capital c. In 2016, the company purchased $6,041 in new fixed assets. The tax rate is 30 percent. 1. How much in fxed assets did the company selr? (Do not round intermediate calculations and round your answer to the n number, e.g., 32.)

Explanation / Answer

Part A:

Owners Equity for 2015 = Assets - Liabilities

Owners Equity for 2015 = 2,801 + 12,593 - 1,083 - 6,518

Owners Equity for 2015 = 7,793

Owners Equity for 2016 = Assets - Liabilities

Owners Equity for 2016 = 2,926 + 13,138 - 1,640 - 7,794

Owners Equity for 2016 = 6,630

Part B:

Net change in working capital in 2016 = Current Assets - Current Liabiliities in 2016

Net change in working capital in 2016 = 2,926 - 1,640

Net change in working capital in 2016 = 1,286

Part C

Fixed assets sold = 12,593 + 6,041 - 13,138

Fixed assets sold = 5,496

Cash flow from assets = (40,210 - 20,130 - 0.30 * (40,210 - 20,130 - 3,486 - 675)) - (13,138 - 12,593 + 3486) - ((2,926 - 1,640) - (2,801 - 1,083))

Cash flow from assets = 11,705.30

Part D:

Cash flow to creditors = Interest paid - (Long term debt in 2016 - Long term debt in 2015)

Cash flow to creditors = 675 - (7,794 - 6,518)

Cash flow to creditors = -601

Part B:

Debt retired = Debt at beginning + New raised debt - Ending debt

Debt retired = 6,518 + 1,945 - 7,794

Debt retired = 669

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