Q2 (Cash flows) -20 Marks

1. Determine the net cash flows for periods 1 through 3 for a firm with the following transactions:

$1,000 spent in period 1 and $2,000 spent in period 2 to produce goods to be sold in the following periods, sales of $2,000 in period 2 and $4,000 in period 3, one-half of all sales are in cash with the other half collected in the following period.

Use the following answer format

Period	1	2	3
Sales
Change in accounts receivable
Cost of goods sold
Change in inventories
Net cash flow

2. What are the overall changes in working capital resulting from the following changes?

$300 increase in inventories, $150 increase in accounts payable, $120 decrease in accounts receivable, $60 decrease in other current assets, $150 decrease in other current liabilities

Use the following answer format

Increase in inventory
Decrease in accounts receivable
Decrease in other current assets
Increase in accounts payable
Decrease in other current liabilities
Net changes in working capital