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Consider the following abbreviated financial statements for Cabo Wabo, Inc.:? a. What is owners? equity for 2018

Question:

Consider the following abbreviated financial statements for Cabo Wabo, Inc.:?

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a. What is owners? equity for 2018 and 2019??

b. What is the change in net working capital for 2019??

c. In 2019, the company purchased $7,876 in new fixed assets. How much in fixed assets did the company sell? What is the cash flow from assets for the year? (The tax rate is 22 percent.)

d. During 2019, the company raised $2,371 in new long-term debt. How much long-term debt must the company have paid off during the year? What is the cash flow to creditors?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Cash Flow From Assets
Cash flow from assets is the aggregate total of all cash flows related to the assets of a business. This information is used to determine the net amount of cash being spun off by or used in the operations of a business. The concept is comprised of...
Transcribed Image Text:

CABO WABO, INC. 2019 Income Statement CABO WABO, INC. Partial Balance Sheets as of December 31, 2018 and 2019 Sales Costs $44,730 2018 2019 2018 2019 22,432 Liabilities and Owners' Equity Assets Depreciation Interest paid 3,777 Current assets $ 2,989 $ 3,169 Current liabilities 14,493 Long-term debt $1,898 $1,291 1,032 Net fixed assets 13,862 7,161 8,221

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a To calculate owners equity we first need total liabilities and assets From the balance sheet relationship we know that total liabilities plus owners equity is equal to total assets We are given the ...View the full answer


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Ashish Jaiswal
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Essentials of Corporate Finance

Essentials of Corporate Finance

ISBN: 978-1260013955

10th edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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Related Video

Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.

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