(Statement of cash flows) Ramagos System’s controller prepared the follow¬ ing cash flow statements (in thousands of dollars) for the past two years, the current year, and the upcoming year (2007):

After preparation of the budgeted cash flow statement for 2007, Arnie Maine, the company president, asked you to recompile it based on a separate set of facts. He is evaluating a proposal to purchase a local-area network (LAN) computer system for the company at a total cost of $50,000. The proposal has been deemed to provide a satisfactory rate of return. However, he does not want to issue additional stock and he would prefer not to borrow any more money to finance the project.
Projecting the market value of the accumulated investments for the pre¬ vious two years ($3,600 and $12,600) reveals an estimate that these invest¬ ments could be liquidated for $18,400. Maine said the investments scheduled for 2007 did not need to be purchased and that dividends could be reduced to 40 percent of the budgeted amount. These are the only changes that can be made to the original forecast.

a. Evaluate the cash trends for the company during the 2004-2007 period.

b. Giving effect to the preceding changes, prepare a revised 2007 budgeted statement of cash flows and present the original and revised in a com¬ parative format.

c. Based on the revised budgeted SCF, can the LAN computer system be purchased if Maine desires an increase in cash of at least $1,000?

d. Comment on the usefulness of the report prepared in part

(b) to Maine.

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Net cash flows from operating activities Net income Add net reconciling items Total Net cash flows from investing activities Purchase of plant and equipment Sale (purchase) of investments Other investing inflows Total Net cash flows from financing activities Payment of notes payable Payment of dividends Total Net change in cash 2004 2005 2006 Budget 2007 $ 41,700 2,200 $ 43,900 $ 39,200 4,300 $ 43,500 $ 43,700 3,000 $ 46,700 $ 45,100 $ 49,100 4,000 $(18,700) 8,700 $(12,200) $ (4,600) $ (3,600) (12,600) 1,200 800 600 $ (8,800) $ (2,800) $(24,200) (15,800) 2,400 $(18,000) $(12,000) (20,000) $(32,000) $(24,000) $(15,000) $ (7,000) (7,000) $(31,000) (13,300) $(28,300) (20,000) $(27,000) $ 3,100 $ 9,700 $ (5,800) $ 4,100