Consider the following potential events that might have occurred to Global on December 30, 2016. For each one, indicate which line items in Global's balance sheet would be affected and by how much. Also indicate the change to Global's book value of equity. a Global used $20.4 million of its available cash to repay $20.4 million of its long-term debt. b. A warehouse fire destroyed $5.1 million worth of uninsured inventory c. Global used $4.5 million in cash and $4.7 million in new long term debt to purchase a $0.2 million building d. A large customer owing $32 million for products it already received declared bankruptcy, leaving no possibility that Global would ever receive payment. e. Globals engineers discover a new manufacturing process that will cut the cost of its flagship product by more than 50% 1. A key competitor announces a radical new pricing policy that will drastically undercut Global's prices. a. Global used $20.4 million of its available cash to repay $20.4 million of its long-term debt. (Select the best choice below.) O A. Long-term liabilities would increase by $20 A million, and cash would increase by the same amount. The book value of equity would be unchanged. O B. Long-term liabilities would decrease by $20.4 million, and cash would increase by the same amount. The book value of equity would be unchanged. OC. Long-term liabilities would decrease by $20.4 million, and cash would decrease by the same amount. The book value of equity would change by $20.4. OD. Long-term liabilities would decrease by $20.4 million, and cash would decrease by the same amount. The book value of equity would be unchanged. b. A warehouse fire destroyed $5.1 milion worth of uninsured inventory. (Select the best choice below.) O A Inventory would increase by $5.1 million, and the book value of equity would decrease by the same amount OB. Inventory would decrease by $5.1 million, and the book value of equity would be unchanged. OC Inventory would increase by $5.1 million, as would the book value of equity D. Inventory would decrease by $5.1 milion, as would the book value of equity c. Global used $4.5 million in cash and $4.7 million in new long-term debt to purchase a $0.2 million building. (Select the best choice below) A Long-term assets would increase by 592 milion, cash would increase by $4.5 milion, and long term abilities would increase by $4.7 milion There would be no change to the book value of equity OB. Long-term assets would increase by $9.2 million, cash would decrease by $4.5 million, and long-term liabilities would increase by $4.7 million. There would be B. Long-term assets would increase by $9.2 million cash would decrease by $4.5 million, and long-term liabilities would increase by $4.7 million. There would be no change to the book value of equity OC. Long-term assets would decrease by $9.2 million, cash would increase by $4.5 million and long-term liabilities would decrease by $4.7 milion. There would be no change to the book value of equity OD. Long-term assets would decrease by $9.2 million, cash would decrease by $4.5 million, and long-term liabilities would increase by $4.7 milion. There would be no change to the book value of equity d. A large customer owng $3.2 million for products it already received declared bankruptcy, leaving no possibility that Global would ever receive payment. (Select the best choice below.) OA Accounts receivable would decrease by $32 million, as would the book valun of equity OB Accounts receivable would increase by $3.2 millon, and the book value of equity would decrease by the same amount OC Accounts receivable would decrease by $3.2 million, and the book value of equity would increase by the same amount OD. Accounts receivable would increase by $3.2 million, as would the book value of equity e. Global's engineers discover a new manufacturing process that will cut the cost of its fogthip product by more than 60% (Select the best choice below) O A. This event would decrease inventory by over 60% and the book value of erity would decrease by the same amount OB. This event would decrease inventory by over 50% a This event with mar and then he finding them e. Globals engineers discover a new manufacturing process that will cut the cost of its flagship product by more than 50%. (Select the best choice below) O A. This event would decrease inventory by over 50% and the book value of equity would decrease by the same amount. OB. This event would decrease inventory by over 50% OC. This event would decrease inventory by over 50% and the book value of equity would increase by the same amount OD. This event would not affect the balance sheet. f. A key competitor announces a radical new pricing policy that will drastically undercut Globa's prices. (Select the best choice below.) O A. This event would decrease the book value of equity B. This event would affect the balance sheet in an unpredictable manner. C. This event would not affect the balance sheet. OD. This event would decrease inventory
