Question

Please Answer BOTH Parts!

1. Provided below are selected in uime statement and balance Sheet informahan fer Binky Supply Company. Assuming that these are the only items affecting the cash account for the firm: • specify whether each item is a sarve or use of cash. compute the change in cash and the ending cash balance assuming a beginning cash balance of $481. $580 60 30 36 50 Net income Deprecahan Dividends Increase in marketable seanhes Decrease in Accounts recevablys Dearare in moto payabil Increase in Accounts Payable Decrease in Accrues wages and taxes. Increase in Inventones Decrease in Long Term Debt Increase in fixed Assets 28 20. 15 35 10 45

Answer 1

Anything which increases the cash balance is a source of cash, and anything which decreases cash balance is a use of cash.

A decrease in current assets is a source of cash because current assets which are locked up in non-cash working capital are converted into cash

An increase in current assets is a use of cash because cash is being used to increase non-cash working capital

A decrease in current liabilities is a use of cash because cash is being used to pay off current liabilities

An increase in current liabilities is a source of cash because non-cash working capital is increasing, and reducing the cash outflow

Amount $ 580 $ 60 $ 30 36 1 Item 2 net income 3 depreciation 4 dividends 5 increase in marketable securities 6 decrease in accounts receivable 7 decrease in notes payable 8 increase in accounts payable 9 decrease in accrued wages/taxes 10 increase in inventories 11 decrease in long term debt 12 increase in fixed assets Source/use Reason Source income from operations generates cash Source Non-cash item Use Dividends paid are a cash outflow Use Increase in current assets is a use of cash Source Decrease in current assets is a source of cash Use Decrease in current liabilities is a use of cash Source Increase in current liabilities is a source of cash Use Decrease in current liabilities is a use of cash Use Increase in current assets is a use of cash Use Repaying debt is a cash outflow Use Purchasing fixed assets is a cash outflow Change in cash Beginning cash balance Ending cash balance $ $ $ $ $ $ 35 70 45 451 487 938 14 15

B 1 Item Source/use 2 net income Source 3 depreciation Source 4 dividends Use 5 increase in marketable securities Use 6 decrease in accounts receivable Source 7 decrease in notes payable Use 8 increase in accounts payable Source 9 decrease in accrued wages/taxes Use 10 increase in inventories 11 decrease in long term debt Use 12 increase in fixed assets Use 13 14 Reason Amount income from operations generates cash 580 Non-cash item 60 Dividends paid are a cash outflow 30 Increase in current assets is a use of cash 36 Decrease in current assets is a source of cash 50 Decrease in current liabilities is a use of cash 28 Increase in current liabilities is a source of cash 20 Decrease in current liabilities is a use of cash 15 Increase in current assets is a use of cash 35 Repaying debt is a cash outflow Purchasing fixed assets is a cash outflow Change in cash =D2+D3-D4-D5+D6-D7+D8-D9-D10-D11-D12 Beginning cash balance 487 Ending cash balance =D13+D14 Use 45 15