Figure 1. Statement of Cash Flows

Operating Activities

Net Income

Adjustments:

Non-cash adjustments

Accumulated depreciation

Changes in working capital

Change in accounts receivable

Change in inventories

Change in accounts payable

Change in accruals

Net cash provided by Operating Activities

Long-Term Investment Activities

Cash used to acquire fixed assets

Financing Activities

Change in long-term debt

Change in common stock

Change in paid-in capital

Payment of cash dividends

Net cash provided by Financing Activities

Summary

Net change in cash

Cash at beginning of year

Cash at end of year

Figure 2. Alpha Unlimited, Inc.

End-of-Year Balance Sheets

2021 2020 2019

cash 2,000,000 2,100,000 2,050,000

accounts receivable 5,500,000 6,275,000 6,873,000

inventories 4,000,000 4,750,000 5,100,000

current assets 11,500,000 13,125,000 14,023,000

gross fixed assets 25,000,000 26,780,000 26,780,000

accumulated depreciation 900,000 950,000 1,000,000

net fixed assets 24,100,000 25,830,000 25,780,000

total assets 35,600,000 38,955,000 39,803,000

accounts payable 3,500,000 3,750,000 4,000,000

accruals 2,000,000 2,250,000 2,500,000

current liabilities 5,500,000 6,000,000 6,500,000

long-term bonds 12,000,000 13,500,000 13,500,000

common stock 2,000,000 2,000,000 2,000,000

paid-in capital 5,000,000 5,000,000 5,000,000

retained earnings 11,100,000 12,455,000 12,803,000

total liabilities & equity 35,600,000 38,955,000 39,803,000

Alpha Unlimited, Inc.

Income Statements

2021 2020 2019

sales 98,000,000 125,500,000 126,000,000

cost of goods sold 86,000,000 108,500,000 110,000,000

depreciation expense 50,000 50,000 50,000

EBIT 11,950,000 16,950,000 15,950,000

interest expense 1,440,000 1,620,000 1,620,000

EBT 10,510,000 15,330,000 14,330,000

taxes @ 40% 4,204,000 6,132,000 5,732,000

NI 6,306,000 9,198,000 8,598,000

cash dividends 5,433,921 8,443,000 8,250,000

Refer to Figures 1 & 2 above. Assume that you are preparing a Statement of Cash Flows for 2021. Which of the following is true of inventories?

A. Inventories will be a source of funds in the amount of $350,000.

B. Inventories will be a use of funds in the amount of $350,000.

C. Inventories will be a source of funds in the amount of $750,000.

D. Inventories will be a use of funds in the amount of $750,000.

E. None of the above is true.

17. Refer to Figures 1 & 2 above. Assume that you are preparing a Statement of Cash Flows for 2021. Which of the following is true of accounts payable?

A. Accounts payable will be a source of funds in the amount of $250,000.

B. Accounts payable will be a use of funds in the amount of $250,000.

C. Accounts payable will be a source of funds in the amount of $4,000,000.

D. Accounts payable will be a use of funds in the amount of $4,000,000.

E. None of the above is true.