Question

CABO WABO, INC Partial Balance Sheets as of December 31, 2018 and 2019 2018 2019 2018 2019 Assets Liabilities and Owners' Equity Current assets $ 2,989 $ 3,169 Current liabilities $ 1,291$ 1898 Net fixed assets 13,862 14,493 Long-term debt 7,161 8,221 CABO WABO, INC. 2019 Income Statement Sales $ 44,730 Costs 22.432 Depreciation 3,777 Interest paid 1,032 a. What is owners' equity for 2018 and 2019? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g. 32.) b. What is the change in net working capital for 2019? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. In 2019, the company purchased $7,876 in new fixed assets. The tax rate is 22 percent. How much in fixed assets did the company sell? What is the cash flow from assets for the year? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g.. 32.) d. During 2019, the company raised $2.371 in new long-term debt. What is the cash flow to creditors? How much long-term debt must the company have paid off during the year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) a.2018 Owners' equity 2019 Owners' equity b. Change in NWC c. Fbced assets sold Cash flow from assets Cash flow to creditors Debt retired

Answer 1

a. owner's equity = total assets - total liabilities
for 2018 = ($2,989 + $13,862) - ( $1,291 + $7,161) = $8,399
for 2019 = ($3,169 + $14,493) - ( $1,898 + $8,221) = $7,543

b. New working capital = current assets - current liability
for 2018 = $2,989 - $ 1,291 = $1,698
for 2019 - $3,169 - $ 1,898 = $1,271
change in NWC for 2019 = $1,271 - $1,698 = -$427

c. Fixed asset sold = Net fixed asset in 2018 + fixed asset purchased - net fixed asset in 2019
= $13,862 + $7,876 - $ 14,493 = $7,245
cash flow from Assets = income on asset sold - purchase cost of new fixed asset +tax on depreciation
= $7,245 - $7,876 + $3,777 * 0.22 = $200

d.

total long term debt paid in 2019 = long term debt in 2018 + new long term debt - long term debt in 2019
= $ 7,161 + $2,371 - $8,221 = $1,311

cash flow to creditors = total long term debt paid in 2019 - new long term debt
= $1,311 - $2,371 = $1,060