# Calculate nonoperating Cash outflow

ASSETS 20X2 20X3 Current Assets Cash 400 380 Accounts Receivable Net 700 800 Merchandise Inventories 500 450 Prepaid Expenses 100 100 Total Current Assets 1,700 \$1,730 Investment in Lumber Mill – 400 Other Long-Term Investments 400 500 Property, Plant and Equipment 3,000 3,400 Less: Accumulated Depreciation (1,000) (1,150) Net Property, Plant and Equipment 2,000 2,250 Other Assets 400 400 Total Assets \$4,500 5,280 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-Term Debt 100 \$ 100 Accounts Payable 300 350 Accrued Expenses 200 240 Income Taxes Payable 100 160 Total Current Liabilities 700 850 Long-Term Debt 800 1,000 Other Liabilities 200 200 Common Shareholders’ Equity 2,800 3,230 Total Liabilities and Shareholders’ Equity \$4,500 \$5,280 Notes: 1. Net income in 20X3, including a \$20,000 gain on asset sales, was \$300,000. 2. Dividends paid in 20X3 were \$70,000. 3. Depreciation expense in 20X3 was \$200,000.

Total Change in cash --> -20,000 CFO–> 300,000 -20,000 -100,000 + 50,000 - 30,000 + 50,000 + 40,000 + 60,000 = 350,000 -20,000 = 350,000 + x x = -370,000 Is this correct?

They asked for only non-operating cash outflow There was an extra piece of information missing above: 4. Expenditures for property, plant and equipment in 20X3 were \$500,000. So I believe Lumber mill 400 Other Long Term Investment 100 PP&E 500 Dividend Paid 70 ========================= Answer 1070 =========================

I think you forgot to add back the depreciation expense…but thats the way I would’ve done it too…

I suck

cpk123 I specially did not mention the 4th footnote. Why we use this footnote and take Expenditures for property, plant and equipment as 500,000 but not calculate it from change in balance accounts: (500-400) for Other Long-Term Investments and + (3400-3000) for Property, Plant and Equipment That will be 400 - Investment in Lumber Mill 100 - Other Long-Term Investments 400 - Property, Plant and Equipment investments 70 - Dividends paid —

then you are 100 off. The PP&E account also from the footnotes has a Gain on Sale of equipment… So something was sold in the month. which would be obtained using the Purchase amount as: PP&E Net begin + Purchase - Depr Expense - Book Value Sold = PP&E Net End 2000+500 - 200 - Book Value Sold = 2250 or Book Value Sold = 2300 - 2250 = 50 Since there was a gain of 20 on the Sale of equipment, Sale price = 70. (which would makes its way into the CFI as an inflow).

Ok. Thats almost clear. But Why dont you take depr. expense 150 (acumulated for period) instead of 200 (stated in footnote)?

200 is the total depreciation expense - for everything and this always comes from the income statement (what you have expensed in the period). What gets shown on the balance sheet is the final adjustment number: What you started with + what you spent - what you spent on Sold.

But we calculate Book value sold for PP&E Dont we need to take depr for PP&E only?

cpk123 and coluld you put here calculated operating, investment and financing cash flows (totals) thanks

CFO = 300 (NI) -20 (Gain on sale)+ 200(Dep) -100(AR) +50 (Inv)+50 (AP)+ 40 (Accrued exp)+ 60 (Income tax payable)= 580 CFI = -400 – 100 -500 + 70 = -930 CFF = -70 + 200 + 200 = +330 Dividend paid = -70, Common Stock = 200, LTD = 200 Total Cash change = 580 -930 + 330 = -20 Sale of Asset: 2000 + 500 – 200 –BV = 2250 BV = 50 Gain = 20 So Sale Price = 70 Common Equity Account balancing: 2800 + 300 – 70 + X = 3230 X = 200 (Common Stock issued)

thanks

cpk123, could you explain once again how you got 500 for PP&E?

500 for the PP&E was a given in the question from Stalla (it was a footnote), which Konstantin thought not required, and he left it out when the original question was posted.

^… that (the value of 500) should have been given in the footnotes in the form of CAPEX only then we can calculate the amount of Book Value sold using the other bits 1. “Net Property, Plant and Equipment” (2002) 2. “Net Property, Plant and Equipment” (2003) 3. Depreciation for the complete year Am I correct ckp? - Dinesh S EDIT: Bingo … that’s what I meant…the CAPEX should be given in the footnotes…

yes… it was in the problem

That’s why the Initial ‘I suck’ … I tried a lot to figure out how we could get to this NVB sold figure and finally gave up… Thanks for confirming anyways!! - Dinesh S

I have arrived at the Sold value figure above… in case you needed it…

cpk123 Wrote: ------------------------------------------------------- > I have arrived at the Sold value figure above… in > case you needed it… Without assuming the capex figure?