Can someone explain why 52 was added to the purchases on theCash Flow Statement Whole Year ($1,000) for Exercise 1.5b on the PDF? The picture shows the question

Solutions Chapter 1 Exercise 1.1 Income Statement Item Sales Cost of Sales Rent Depreciation Profit Cash Flow Statement Item Receipts Receivables January Sales February Payments Purchase bottles Payables January Payment Car Change in cash position Final Balance Sheet Item Car Inventory Receivables Cash Total Assets Equity Trade Payables Rent Payable Total Sources Exercise 1.2 a. Income Statement Item Sales Cost of sales Salary Profit Calculations 3,000*$8 3,000*$5 $6,000/(5*12) Outcome ($) 24,000 (15,000) (2,000) (100) 6,900 Calculations Outcome ($) 0.30*$24,000 16,000 7,200 0.60*$20,000 (12,000) (17,500) (6,000) (12,300) Calculations $6,000 - $100 $22,500 - 3,000*$5 + 4,000*$5 $24,000*0.7 $14,000 - $12,300 $35,000 + $6,900 4,000*$5*0.4 Calculations 600*$25 600*$20 $1,300 + $200 Outcome ($) 5,900 27,500 16,800 1,700 51,900 41,900 8,000 2,000 51,900 Outcome ($) 15,000 (12,000) (1,500) 1,500 b. Cash Flow Statement Item Cash Sales Receipt from client Payment to supplier Salary payment Increase cash c. Balance Sheet ($) Item Inventory Receivables Cash Total Assets Equity Payables Salary payable Total Sources Calculations Calculations $15,000 - (600*$20) + (500*$20) $7,800 + ($15,000 - $5,000) - $6,000 $1,200 + $2,700 $16,000 + $1,500 $8,000 + (500*$20) - $7,000 Exercise 1.3 a. Income Statement Item Sales Cost of sales Depreciation Rent Profit (Loss) b. Cash Flow Statement Item Receipt from client Payment purchase Payment to supplier Decrease bank Outcome ($) 5,000 6,000 (7,000) (1,300) 2,700 ($) 13,000 11,800 3,900 28,700 17,500 11,000 200 28,700 Calculations 4,000*3 4,000*2 Outcome () 12,000 (8,000) (400) (5,700) (2,100) Calculations Outcome () 5,000 (4,200) (4,000) (3,200) $7,000*0.6 c. Balance Sheet Item Car Inventory Receivables Bank Total Assets Equity Payables Rent payable Total Sources Calculations 9,700 - 400 12,000 - 8,000 + 7,000 5,600 + 12,000 - 5,000 4,900 - 3,200 21,900 - 2,100 10,300 + (0.4*7,000) - 4,000 Outcome () 9,300 11,000 12,600 1,700 34,600 19,800 9,100 5,700 34,600 Exercise 1.4 a. Inventory must increase from $30,000 to $105,000 (+$75,000). Cash Flow Statement ($1,000) Sales receipts $1,500*10/12 Receivables begin Purchases ($1,125+$75)*10/12 Trade Payables begin Other expenses $240*11/12 + $9.6 Redemption Interest $190*8%*1/2 + $180*8%*1/2 Computer Cash increase b. Balance Sheet ($1,000) Building Equipment Inventory Receivables Cash Total Assets Equity Loan Trade payable Expenses payable Total Sources 480 - 24 150 - 10 + 6 1,500*2/12 15 + 41.6 527.4 + 86.2 190 - 10 1,200*2/12 240*1/12 Exercise 1.5 a. Income Statement ($1,000) Sales $1,300*1.2 Cost of sales $1,560*0.75 Over head Selling expenses Profit before Tax 456 146 105 250 56.6 1,013.6 613.6 180 200 20 1,013.6 1,560 (1,170) (230) (90) 70 1,250 200 (1,000) (148) (229.6) (10) (14.8) (6) 41.6 Tax Profit after Tax $70*0.3 (21) 49 Inventory must increase 20%*$260,000 = $52,000. So purchases must exceed cost of sales by $52,000. b. Cash Flow Statement Whole Year ($1,000) Sales receipts $1,560*40/52 Receivables begin Purchases ($1,170+$52)*44/52 Payables begin Overhead $230 - $15 - $35 Selling $90 - $12 Tax payable Profit distribution $49*0.40 Investment Decrease bank Cash Flow Statement per Quarter ($1,000) 1 2 Sales 30 390 Receivables 250 Purchases (117.5) (305.5) Payable begin (300) Overhead (45) (45) Selling exp (19.5) (19.5) Investment (50) Tax (96) Profit distr. Net cash flow (252) (76) Bank begin 56 (196) Bank ending (196) (272) 1,200 250 (1,034) (300) (180) (78) (96) (19.6) (50) (307.6) 3 390 4 390 (305.5) (305.5) (45) (19.5) (45) (19.5) 20 (272) (252) (19.6) 0.4 (252) (251.6) c. Balance Sheet ($1,000) Premises & Fixtures Showroom Inventory Receivables Total Assets Equity Trade payable Tax payable Bank Total Sources $580 - $50 $50 -$12 $260*1.2 $1,560*12/52 $750 + $49*0.6 $1,222*8/52 $56 - $307.6 530 38 312 360 1,240 779.4 188 21 251.6 1,240 d. The expansion results in increased profits. The old sales level generates a pretax profit of ($1,000): 1,300*0.25 - 230 - 78 = 17. They have a cash flow problem however. They may ask the bank to allow an overdraft, but other measures can be taken too. The showroom can be financed by attracting a loan. Echo could consider reducing the credit terms of sales, thus receiving cash more quickly. At the same time, they can negotiate longer credit terms or lower prices for their own supplies since they buy larger quantities. Exercise 1.6 a. Balance Sheet January 1 ($) Finished product 1,800*16 Materials 4,580*4 Receivables Bank Total Assets Equity 76,120 - 11,000 Payables Total Sources 28,800 18,320 24,000 5,000 76,120 65,120 11,000 76,120 b. Production: 900 + 980*12 - 1,800 = 10,860 units. 10,860/12 = 905 per month. c. Purchases: 2,000*$4 + 12*905*$12 - 4,580*$4 = $120,000 = $10,000 per month. d. Income Statement ($) Sales 980*12*$20 235,200 Cost of sales 980*12*$16 (188,160) Profit 47,040 e. Cash Flow Statement ($) Sales receipts Receivables begin Purchases $235,200*10.5/12 $120,000*10.5/12 205,800 24,000 (105,000) Payables begin Labor (16-12 = 4 per unit) Increase bank 10,860*$4 f. Balance Sheet December 31 ($) Finished product 900*$16 Materials 2,000*$4 Receivables $235,200*1.5/12 Bank $5,000 + $70,360 Total Assets Equity $65,120 + $47,040 Payables $120,000*1.5/12 Total Sources (11,000) (43,440) 70,360 14,400 8,000 29,400 75,360 127,160 112,160 15,000 127,160