Ch.3. Homework Problem 1.The credit manager at First National Bank has just received the income statement and balance sheet for Magna Fax, Inc. for the year ended December 31, 2014. (See Table 1) The bank requires the firm to report its earnings performance and financial position quarterly as a condition of a loan agreement. The bank's credit manager must prepare key financial statements based on the information sent by Magna Fax, Inc. This will be passed on to the commercial loan officer assigned to this account, so that he may review the financial condition of the firm.

(a) Prepare the statement of sources and uses of cash for the year ended December 31, 2014.

(The statement of sources and uses of cash is what we did on the first page of chapter 3 handout).

(b) What are the net cash flows from operating activities and investment activities for the year ended December 31, 2014?

Table 1, Magna Fax, Inc., Income Statement, 2014 Sales Revenue Cost of Goods Sold SGA Expenses Depreciation EBlT Interest Expense Taxable Income Taxes (40%) Net Income Dividend Payments Addition to Retained Earnings $150,000 (1 17,500) (8,500) (4,000) 20,000 (2,500) 17,500 (7,000) $10,500 (6,500) 4,000 Magna Fax, Inc., Balance Sheet, For the Years Ended December 31, 2013 and 2014 Assets Cash Accounts receivable humnky Net xed assets Total Assets Liabilities and Stockholders' Equity Accounts payable Notes payable Accruals Long-term debt Common stock at par Paid-in capital in excess of par Retained earnings Total Liabilities and Stockholders' Equity 2014 $24,000 45,000 30,000 20,000 $119,000 $25,000 50,000 1,000 10,000 1,000 4,000 23,000 $119,000 2013 $21,000 39,000 27,000 22,000 $109,000 $30,000 40,000 2,000 8,000 1,000 4,000 24,000 $109,000