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Complete Problems 27, 28, and 29 on pp. 51-53.


Complete Problems 27, 28, and 29 on pp. 51-53.

Fin 200 Week 1 SOLUTION cash flows for the Crosby Corporation

Foundations of Financial Management: Block Hirt Danielsen Introduction to Finance: Harvesting the Money Tree Axia College of University of Phoenix (UoP)

Cash Flow Preparation
Resource: Ch. 2 of Foundations of Financial Management
Problems 27, 28, and 29 on pp. 51-53.

27 Prepare a statement of cash flows for the Crosby Corporation

CROSBY CORPORATION
Income Statement
For the Year Ended December 31, 2008

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $2,200,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,300,000
Gross profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  900,000
Selling and administrative expense . . . . . . . . . . . . . . . . . . . .  420,000
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  150,000
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  330,000
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  90,000
Earnings before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .  240,000
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  80,000
 

CROSBY CORPORATION
Income Statement
For the Year Ended December 31, 2008

Earnings after taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  160,000
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .  10,000
Earnings available to common stockholders . . . . . . . . . . . . .  $ 150,000
Common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . .  120,000
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 1.25

CROSBY CORPORATION
Income Statement
For the Year Ended December 31, 2008

Earnings after taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  160,000
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .  10,000
Earnings available to common stockholders . . . . . . . . . . . . .  $ 150,000
Common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . .  120,000
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 1.25 

Statement of Retained Earnings
For the Year Ended December 31, 2008
Retained earnings, balance, January 1, 2008 . . . . . . . . . . . . . . . . . . . .   $500,000
Add: Earnings available to common stockholders, 2008 . . . . . . . . . .  150,000
Deduct: Cash dividends declared and paid in 2008 . . . . . . . . . . . . .  50,000
Retained earnings, balance, December 31, 2008 . . . . . . . . . . . . . . . . .   $600,000

Comparative Balance Sheets
For 2007 and 2008
Year-End  Year-End
2007  2008

Assets
Current assets:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 70,000  $100,000
Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . .  300,000  350,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  410,000  430,000
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50,000   30,000
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   830,000  910,000
Investments (long-term securities) . . . . . . . . . . . . . . . . . . .  80,000   70,000
Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2,000,000  2,400,000
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . .   1,000,000  1,150,000
Net plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,000,000  1,250,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,910,000  $2,230,000 

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 250,000 $  440,000
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  400,000  400,000
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70,000   50,000
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .   720,000  890,000

Long-term liabilities:
Bonds payable, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70,000   120,000
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   790,000  1,010,000
 
Stockholders’ equity:
Preferred stock, $100 per value . . . . . . . . . . . . . . . . . . . . . .  90,000   90,000
Common stock, $1 par value . . . . . . . . . . . . . . . . . . . . . . . .  120,000  120,000
Capital paid in excess of par . . . . . . . . . . . . . . . . . . . . . . . .  410,000  410,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  500,000  600,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .  1,120,000  1,220,000
Total liabilities and stockholders’ equity . . . . . . . . . . . . . .  $1,910,000  $2,230,000

28. Describe the general relationship between net income and net cash flows from operating activities for the firm.

29. Has the buildup in plant and equipment been financed in a satisfactory manner? Briefly discuss.
 
SOLUTION PREVIEW
CROSBY CORPORATION
Statement of Cash flows
For the Year ended December 31, 2008
Cash flows from operating activities:
   Net income (earnings after taxes)
160,000
   Adjustments to determine cash flow operating activities:
         Add back depreciation
150,000
          Increase/(Decrease) in accounts receivable
-50,000
          Increase/ (Decrease) in inventory
-20,000
 
File name: Fin200-2-272829-Crosby-Corporation.xls File type: application/vnd.ms-excel PRICE: $12