Consider the following abbreviated financial statements for Parrothead Enterpris

Question

Consider the following abbreviated financial statements for Parrothead Enterprises: PARROTHEAD ENTERPRISES 2014 and 2015 Partial Balance Sheets Assets Liabilities and Owners’ Equity 2014 2015 2014 2015 Current assets $ 924 $ 1,002 Current liabilities $ 370 $ 428 Net fixed assets 3,917 4,556 Long-term debt 2,006 2,142 PARROTHEAD ENTERPRISES 2015 Income Statement Sales $ 11,295 Costs 5,535 Depreciation 1,020 Interest paid 180

a. What is owners' equity for 2014 and 2015? (Do not round intermediate calculations.) Owners' equity 2014 $ 2465 Owners' equity 2015 $ 2988

b. What is the change in net working capital for 2015? (Do not round intermediate calculations.) Change in NWC $ 20

c-1 In 2015, Parrothead Enterprises purchased $1,820 in new fixed assets. How much in fixed assets did Parrothead Enterprises sell? (Do not round intermediate calculations.) Fixed assets sold $ 161

c-2 In 2015, Parrothead Enterprises purchased $1,820 in new fixed assets. What is the cash flow from assets for the year? (The tax rate is 35 percent.) (Do not round intermediate calculations.) Cash flow from assets $ 2485

d-1 During 2015, Parrothead Enterprises raised $360 in new long-term debt. How much long-term debt must Parrothead Enterprises have paid off during the year? (Do not round intermediate calculations.) Debt retired $ 224

d-2 During 2015, Parrothead Enterprises raised $360 in new long-term debt. What is the cash flow to creditors? (Do not round intermediate calculations.) Cash flow to creditors $ 405

Explanation / Answer

1.

Equity = Current Assets + Non-current assets – Current liabilities – Long term liabilities

2014 = 924 + 3,917 – 370 – 2,006

2014= 2,465

2015 = 1,002 + 4,556 - 428 - 2,142

2015 = 2,988

2.

Working Capital = Current Assets – Current Liabilities

Net change in Working Capital = Working capital in 2015 – Working capital in 2014

Working capital in 2014 = 924 – 370 = 554

Working capital in 2015 = 1,002 – 428 = 574

Net change = 574 – 554

Net change in Working Capital = 20

3.1

Closing Balance of assets = Opening balance + Purchases – Sold - Depreciation

Sold = Opening balance + Purchases - Closing Balance of assets - Depreciation

= 3,917 + 1,820 - 4,556 – 1,020

Asset sold during the year= 161

3.2

Cash flow from Operating

Net profit before interest and tax = 11295 – 5535 – 1020

= 4740

Operating Cash flow = Net profit before tax + Depreciation – Tax

= 4740 + 1020 – 35% (11295 – 5535 – 1020 – 180)

Operating Cash flow = 4164

Capital Spending = Closing Net assets – Opening net assets + Depreciation

= 4556 – 3917 + 1020

Capital Spending = 1659

Cash flow from Assets = Operating cash flow – Capital spending – change in Working capital

= 4164 – 1659 – 20

= 2485

4.1

Closing Debt = Opening debt + raised – paid

Paid = Opening + raised – closing

= 2006 + 360 – 2142

Debt paid= 224

4.2

Cash paid to creditors =Interest due – New long term liability raised

= 180 – (2142 – 2006)

Cash paid to creditors = 44

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