Question

Consider the following abbreviated financial statements for Parrothead Enterprises: PARROTHEAD ENTERPRISES 2010 and 2011 Partial Balance Sheets Assets Liabilities and Owners' Equity 2010 2011 2010 2011 Current assets $ 940 $ 996 Current liabilities $ 380 $ 401 Net fixed assets 3,987 4,588 Long-term debt 2,025 2,182 PARROTHEAD ENTERPRISES 2011 Income Statement Sales $ 12,055 Costs 5,815 Depreciation 1,060 Interest paid 180

a. What is owners' equity for 2010 and 2011? Owners' equity 2010 $ Owners' equity 2011 $

b. What is the change in net working capital for 2011? Change in NWC $

c-1 In 2011, Parrot head Enterprises purchased $1,860 in new fixed assets. How much in fixed assets did Parrot head Enterprises sell? Fixed assets sold $

c-2 In 2011, Parrot head Enterprises purchased $1,860 in new fixed assets. What is the cash flow from assets for the year? (The tax rate is 35 percent.) Cash flow from assets $

d-1 During 2011, Parrot head Enterprises raised $410 in new long-term debt. How much long-term debt must Parrot head Enterprises have paid off during the year? Debt retired $

d-2 During 2011, Parrot head Enterprises raised $410 in new long-term debt. What is the cash flow to creditors?

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ChancellorMorning214 Answered 14 minutes ago

a. Owners' equity 2010 $2,522 Owners' equity 2011 $3,001

b. Change in NWC

c-1. Fixed assets sold

c-2. Cash flow from assets

d-1. Debt retired

d-2. Debt paid off to creditors

Answer 1

a.

	2010	2011
Current assets	940	996
Net fixed assets	3987	4588
Total assets	4927	5584
Less:
Current liabilities	380	401
Long-term debt	2025	2182
Owners' equity	2522	3001

b. Change in net working capital for 2011 = $35 [ 595 -560]

	2010	2011
Current assets	940	996
Less: Current liabilities	380	401
Working capital	560	595

c1. Fixed assets sold = 199

Net fixed assets 2010	3987
Add:Purchases	1860
Less: Fixed assets 2011	4588
	1259
Less; Depreciation	1060
Assets sold	199

c-2. Cash flow from assets = 2794

Operating cash flow	4490
- Net Capital spending	1661
- Changes in NWC	35
Cash flow from assets	2794

d1. Debt retired = $ 253 [ 2025+410-2182]

d2. Debt paid off to creditors = 23

Interest paid	180
- Net new borrowing	157 [2025-2182]
	23