Current Asset Management Solutions 2

Current Asset Management Solutions 2 - $3,300,000 Impact of...

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Old Exam Questions - Current Asset Management - Solutions Page 2 of 21 Pages Calculate the interest savings and net savings: Interest = ($500,000) * (0.11) = $55,000. Net savings = Interest - Annual lockbox cost = $55,000 - $15,000 = $40,000 3. The accounts of your company indicate the following changes in long-term assets and capital for the past year: (1) Fifty thousand (50,000) shares of common stock were sold at $25 per share. (2) Two million dollars ($2 million) in bonds matured and were retired. (3) Dividends of $1 million were paid. (4) Net fixed assets declined by $200,000. (5) Net income was $2 million. (6) Depreciation expense was $1.5 million. What was the increase or decrease in net working capital? (Hint: Changes in net fixed assets incorporate changes in both gross fixed assets and accumulated depreciation.) * A. $ 450,000 B. -$ 250,000 C. -$1,950,000 D. $1,950,000 E.
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Unformatted text preview: $3,300,000 Impact of transactions on cash: Common stock sale $1,250,000 Bond retirement - 2,000,000 Dividend payment - 1,000,000 Net income 2,000,000 Depreciation cash flow 1,500,000 Investment in fixed assets* - 1,300,000 $ 450,000 *If accumulated depreciation increased by $1,500,000 and net fixed assets declined by only $200,000, then the company must have invested $1,300,000 in new gross fixed assets. 4. Your company is constructing a monthly cash budget for the month of October, November, and December. You have been given the following data: It is currently the end of September (beginning of October). Actual sales were $100 in August and $200 in September. Forecasted sales are $300 for October, $300 for November and $200 for December. Collections of sales are 10 percent in the month of sale, 65 percent the month after sale, and 20% two months after sale....
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