Solved Step By Step With Explanation – Balance Sheets and Statements

Question

d-1. During 2020, the company raised $727 in new long-term debt. How much long-term debt must the company have paid off during the year? (Do not round intermediate calculations.)

d-2. During 2020, the company raised $727 in new long-term debt. What was the cash flow to creditors? (Do not round intermediate calculations.)

Solved Step By Step With Explanation – Balance Sheets and Statements

Owners' Equity 2019 = Total Assets 2019 - Total Liabilities 2019

= (Current Assets 2019 + Net Fixed Assets 2019) - (Current Liabilities 2019 + Long-Term Debt 2019)

= (Current Assets 2020 + Net Fixed Assets 2020) - (Current Liabilities 2020 + Long-Term Debt 2020)

= ($1,278 + $6,023) - ($582 + $3,434)

For 2019:

NWC2019 = Current Assets 2019 - Current Liabilities 2019

= $1,278 - $582

= $696

Fixed Assets Sold = Net Fixed Assets 2019 - Net Fixed Assets 2020 + Depreciation

Net Fixed Assets 2019 = $5,732

= $1,287

c-2. Cash Flow From Assets in 2020:

Debt Raised = $727

Tax Rate = 21%

= $3,434 - $3,192

= $242

Depreciation = $1,496

Cash Flow From Assets = (Interest Paid + Debt Retired) + (Net Fixed Assets Sold + Depreciation)

Debt Retired = Debt Raised - Change in Long-Term Debt

= $727 - $242

= $1,139

Now let's summarize the results:

c-2. Cash Flow From Assets = $3,922

d-1. Debt Retired = $485