Cash Flows-Incomplete Data. Gibbons Transport Company plans to acquire new trucks in 1999 at an estimated cost
Question:
Cash Flows-Incomplete Data. Gibbons Transport Company plans to acquire new trucks in 1999 at an estimated cost of \(\$ 4,000,000\). The company president hopes that the past year's operations can produce cash to finance at least half of the acquisition. Temporary investments should pay for the other half.
The company controller is out of town, but you have been able to obtain the following information from the assistant controller. The assistant's numbers are solid for current assets, but the noncurrent accounts' events and balances are only estimates. All figures are in thousands of dollars.
The assistant controller also told you the following:
1. An addition to the terminal buildings cost \(\$ 500,000\) in March 1999 .
2. Trucks with a book value of \(\$ 1,100,000\) were sold in April 1999, incurring an aftertax loss of \(\$ 230,000\). No trucks were purchased.
3. Net income for the year ended June 30,1999 , including the loss on truck sales, was \(\$ 1,600,000\).
\section*{Required:}
1. From the information given, prepare a statement of cash flows for the fiscal year ended June 30,1999 .
2. What is the source of the additional temporary investments?
3. If a minimum cash balance of \(\$ 1,500,000\) is considered necessary, does it appear that the president's goal can be achieved? Explain.
Step by Step Answer:
Managerial Accounting
ISBN: 9780538842822
9th Edition
Authors: Harold M. Sollenberger, Arnold Schneider, Lane K. Anderson