Question
Adjust the Cash Balance We obtain the following 2018 forecasts of selected financial statement line items for Journey Company. $ millions 2017 Actual 2018 Est.
Adjust the Cash Balance We obtain the following 2018 forecasts of selected financial statement line items for Journey Company.
| $ millions | 2017 Actual | 2018 Est. |
|---|---|---|
| Net Sales | $728,553 | $760,438 |
| Marketable securities | 67,096 | 62,096 |
| Long-term debt | 346,558 | 308,437 |
| Treasury stock (deducted from equity) | 51,174 | 51,174 |
| Cash generated by operations | 57,807 | |
| Cash used for investing | (15,019) | |
| Cash used for financing | (54,549) | |
| Total net change in cash | (11,761) | |
| Cash at beginning of period | 51,141 | |
| Cash at end of period | $39,380 |
a. Does forecasted cash deviate from the normal level for this company? Calculate the company's normal cash level as a percentage of sales. Round answer to one decimal place. Answer% Using the rounded answer above, compute what should be the normal cash balance for FY2018. Round answer to the nearest million. $Answer million b. Is the deviation in part a large enough to require adjustment? Explain.
No. the deviation is not large enough to require an adjustment.
Yes, the deviation is large enough to require an adjustment.
c. Identify three ways to adjust the forecasted cash balance. Which option would least likely be used to adjust the cash balance?
Sell marketable securities
Decrease capital expenditures
Increase long-term debt
Sell treasury stock
d. Complete the following statement of cash flows assuming long-term debt is used to adjust the forecasted cash balance.
Use negative signs with answers, when appropriate.
| Cash generated by operations | Answer | |||
| Cash used for investing | Answer | |||
| Cash used for financing | Answer | |||
| Total change in cash | Answer | |||
| Cash at beginning of period | Answer | |||
| Cash at end of period | Answer |
e. Complete the following statement of cash flows assuming marketable securities are used to adjust the forecasted cash balance.
Use negative signs with answers, when appropriate.
| Cash generated by operations | Answer | |||
| Cash used for investing | Answer | |||
| Cash used for financing | Answer | |||
| Total change in cash | Answer | |||
| Cash at beginning of period | Answer | |||
| Cash at end of period | Answer |
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Auditing And Other Assurance Services
Authors: Alvin Arens, James Loebbecke, W Lemon, Ingrid Splettstoesser
9th Canadian Edition
9780130091246
