ASSIGN 5 SOLUTION - 7,000 Cash balance (E) $ 6000 5....

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HW#5 1-3: 18 points (6 points each) 5-6 60 points (5 points for each correct number and 5 points for the note; 6: 22 points (10 for stating NI accrual based not cash based; 10 for stating NI focus on operating activities but financing and investing activities use/generate cash too) 1. Cash collected from the customers $215,000 - (18,000 - 27,000)=$224,000 2. Cash paid from purchase inventory -$140,000- (23,000-20,000) + (13,000 – 15,000) = -$145,000 3. Cash paid from income tax -$10,400 + (2,000 – 2,500) = $10,900 4. Statement of cash flows Operating activities Net income $ 24,200 Depreciation 5,000 +Decrease in A/R 9,000 -Increase in inventory -3,000 +Increase in wages/P 4,300 -Increase in prepaid insurance -300 -Decrease in A/P -2,000 -Decrease in tax/P -500 CFO $ 36,700 Investing activities Cash paid for plant and equipment -10,000 CFI -10,000 Financing activities Repayment of bank loan -20,000 Dividends paid -7,700 CFF -27,700 Net change in cash -1,000 Cash balance (B)
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Unformatted text preview: 7,000 Cash balance (E) $ 6000 5. $15,000 of shares were issued in exchange for land. 6. Although Atlantic Inc. earned $24,200 net income during 2006, its CFO was $36,700. Non-cash item depreciation is added and changes in non-cash working capital accounts are adjusted to NI to determine CFO. Most specifically, decrease in A/R and increase in Wages/P affect CFO positively; increase in inventory and prepaid insurance and decrease in A/P and tax/P affect CFO negatively. In addition, $10,000 was invested in plant and equipment and $27,700 was paid to reduce debt and as dividends. In conclusion, NI is accrual based so it differed from CFO. Cash was also used for financing and investing activities. Atlantic Inc. invested $25,000 in land and plant and equipment. To finance the investments, in addition to the $36,700 generated from operating activities, Atlantic Inc. raised $12,700 from financing activities and used $1,000 cash it had....
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This note was uploaded on 10/19/2011 for the course ACCT 2241 taught by Professor Cumming during the Spring '11 term at Dalhousie.

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ASSIGN 5 SOLUTION - 7,000 Cash balance (E) $ 6000 5....

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