Skills Case 12-9

Change the amounts for selected balance sheet accounts in the spreadsheets created for either S12-7 or S12-8 to calculate the net cash flows from operating activities if, just before the current year-end, the companys management took the actions listed in the following requirements. Consider each question independently, unless indicated otherwise.

Skills Case 12-7:

Youve recently been hired by B2B Consultants to provide financial advisory services to small business managers. B2Bs clients often need advice on how to improve their operating cash flows and, given your accounting background, youre frequently called upon to show them how operating cash flows would change if they were to speed up their sales of inventory and their collections of accounts receivable or delay their payment of accounts payable. Each time youre asked to show the effects of these business decisions on the cash flows from operating activities, you get the uneasy feeling that you might inadvertently miscalculate their effects. To deal with this once and for all, you e-mail your friend Owen and ask him to prepare a template that automatically calculates the net operating cash flows from a simple comparative balance sheet. You received his reply today.

Required:

1. What if the company collected $10,000 of the accounts receivable?

2. What if the company had paid down its interest payable by an extra $2,000?

3. What if the company waited an additional month before paying $6,000 of its accounts payable?

4. What if the company had reported $5,000 more depreciation expense?

5. What if all four of these events had taken place at the same time?

Small Business Client Balance Sheet At December 31 Small Business Client Income Statement For the Year Ended December 31 Sales Revenues Cost of goods sold Depreciation expense Other Operating Expenses Operating Income Interest Expense Income before income taxes Income tax expense Net Income $ $ $ $ $ $ $ $ $ 102,000.00 77,400.00 10,000.00 1,800.00 12,800.00 2,800.00 10,000.00 3,500.00 6,500.00 ASSETS Current Year Prior Year Change Cash $ 8,000.00 $ 12,000.00 Accounts Receivable $ 16,900.00 $ 8,500.00 Inventories $ 37,600.00 $ 25,900.00 Total Current Assets $ 62,500.00 $ 46,400.00 Property, Plant, Equipment $ 105,000.00 $ 105,000.00 Less: Accumulated Depreciation $ (20,000.00) $ (10,000.00) Total Assets $ 147,500.00 $ 141,400.00 LIABILITIES Accounts Payable $ 31,400.00 $ 30,000.00 Income Taxes Payable $ 3,000.00 $ 4,000.00 Interest Payable $ 4,000.00 $ 1,800.00 Other Accrued Liabilities $ 11,000.00 $ 14,000.00 Total Current Liabilitites $ 49,400.00 $ 49,800.00 Long-Term Debt $ 40,000.00 $ 40,000.00 Total Liabilities $ 89,400.00 $ 89,800.00 STOCKHOLDER'S EQUITY Contributed Capital $ 10,000.00 $ 10,000.00 Retained Earnings $ 48,100.00 $ 41,600.00 Total Stockholder's Equity $ 58,100.00 $ 51,600.00 Total Liabilities and Stockholder's Equity $147,500.00 $ 141,400.00 Skills Case 12-9 1) Net Cash flow of operating = 2) Net Cash flow of operating = 3) Net Cash flow of operating = 4) Net Cash flow of operating = 5) Net Cash flow of operating =