Question

For 2012, Wildhorse Manufacturing Company provided the following accounting information: Net operating income $78,000 Depreciation on...

For 2012, Wildhorse Manufacturing Company provided the following accounting information:
Net operating income $78,000
Depreciation on equipment and building 10,000
Sale of land 27,500
Purchase of equipment 14,400
Retirement of long-term debt 36,000
Dividends paid 13,100
Purchase of long‐term investments 10,200
Which of the above are sources of funds?
Net operating income

YesNo
Depreciation on equipment and building

YesNo
Sale of land

YesNo
Purchase of equipment

YesNo
Retirement of long-term debt

YesNo
Dividends paid

YesNo
Purchase of long‐term investments

YesNo


Calculate total sources of funds.

Total sources of funds $
Which of the above are uses of funds?
Net operating income

YesNo
Depreciation on equipment and building

YesNo
Sale of land

YesNo
Purchase of equipment

YesNo
Retirement of long-term debt

YesNo
Dividends paid

YesNo
Purchase of long‐term investments

YesNo

Calculate total uses of funds.
Total uses of funds $
What is the overall increase or decrease in cash?
Cash will

increase/decrease

by $ .
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Answer #1

a)Sources of funds are:

Amount($)
Net operating income 78,000
Sale of land 27,500
Source of Fund 105,500
Add:Depreciation 10,000
Total Sources of funds 115,500

You should notice that,depreciation is not a source of fund as it does not involve the cash flow,however it saves the cash outlow in term of tax,thus it is added to arrive at total source of funds.That is why I have considered it in my calculation.

b)Uses of funds are:

Amount($)
Purchase of equipment 14,400
Retirement of long-term debt 36,000
Dividends paid 13,100
Purchase of long‐term investments 10,200
Total Uses of funds 73,700

c)Calculation of overall increase or (decrease) in cash

=Sources of funds-Uses of funds

=$115,500-$73,700

=$41,800

Cash is increase by $41,800

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