Inferring cash flows from balance sheet and income statement data. (Based on a problem prepared by Stephen A. Zeff.) You work for the Plains State Bank in Miles City, Montana, as an analyst specializing in the financial statements of small businesses seeking loans from the bank. Digit Retail Enterprises, Inc., provides you with its balance sheet on December 31, Year 4 and Year 5 (Exhibit 4.38), and its income statement for Year 5 (Exhibit 4.39). The firm's independent accountant has audited these financial statements and found them to be in conformity with generally accepted accounting principles. Digit Retail Enterprises acquired no new property, plant, and equipment during the year.

a. Calculate the amount of cash received from customers during the year.

b. Calculate the acquisition cost of merchandise purchased during the year.

c. Calculate the amount of cash paid to suppliers of merchandise during the year.

d. Calculate the amount of cash paid to salaried employees during the year.

e. Calculate the amount of cash paid to insurance companies during the year.

f. Calculate the amount of cash paid to landlords for rental of space during the year.

g. Calculate the amount of dividends paid during the year.

h. Calculate the amount of cash received when property, plant, and equipment were sold during the year.

Transcribed Image Text:

EXHIBIT 4.38 DIGIT RETAIL ENTERPRISES, INC. Balance Sheet (Problem 35] December 31, Year 4 December 31, Year 5 ASSETS Current Assets Cash Accounts Receivable Notes Receivable Interest Receivable Merchandise Inventory Prepaid Insurance Prepaid Rent Total Current Assets Property, Plant, and Equipment At Cost Less Accumulated Depreciation Net Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable-Merchandise Suppliers Salaries Payable Rent Payable Advances from Customers Note Payable Dividends Payable Other Current Liabilities. $ 36,000 23,000 $ 50,000 38,000 7,500 100 48,000 65,000 9,000 12,000 2,000 $125,600 $165,000 $100,000 (20,000) $ 80,000 $205,600 $ 90,000 (35,000) $ 55,000 $220,000 $ 18,000 $ 20,000 2,100 2,800 3,000 8,500 6,100 5,500 4,200 2,600 1,300 3,700 $ 34,100 $ 43,700 $160,000 $164,500) Retained Earnings 11,500 Total Shareholders' Equity $171.500 11,800 $176,300 Total Liabilities and Shareholders' Equity $205.600 $220,000 Total Current Liabilities. Shareholders' Equity Common Stock