8. State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows:12. Sweeter Enterprises Inc. has cash flows from operating activities of $300,000. Cash flows used for investments in property, plant, and equipment totaled $63,000, of which 60% of this investment was used to replace existing capacity. **Effect of Transactions on Cash Flows**State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows:a. Retired $200,000 of bonds, on which there was $2,000 of unamortized discount, for $208,000. - **Effect:** Cash payment - **Amount:** $208,000b. Sold 12,000 shares of $10 par common stock for $20 per share. - **Effect:** Cash receipt - **Amount:** $240,000c. Sold equipment with a book value of $51,800 for $74,600. - **Effect:** Cash receipt - **Amount:** $74,600d. Purchased land for $473,000 cash. - **Effect:** Cash payment - **Amount:** $473,000e. Purchased a building by paying $90,000 cash and issuing a $100,000 mortgage note payable. - **Effect:** Cash payment - **Amount:** $90,000f. Sold a new issue of $270,000 of bonds at 99. - **Effect:** Cash receipt - **Amount:** $267,300g. Purchased 3,600 shares of $15 par common stock as treasury stock at $29 per share. - **Effect:** Cash payment - **Amount:** $104,400h. Paid dividends of $2.20 per share. There were 22,000 shares issued and 4,000 shares of treasury stock. - **Effect:** Cash payment - **Amount:** $39,600Each transaction provides a specific impact on cash flows, either increasing (receipt) or decreasing (payment) the cash available to the company. **Free Cash Flow**Sweeter Enterprises Inc. has cash flows from operating activities of $300,000. Cash flows used for investments in property, plant, and equipment totaled $63,000, of which 60% of this investment was used to replace existing capacity.a. Determine the free cash flow for Sweeter Enterprises Inc.\[ \text{Free Cash Flow} = \]b. How might a lender use free cash flow to determine whether or not to give Sweeter Enterprises Inc. a loan?Free cash flow is often used to measure the financial strength of a business. The **more** free cash flow that a business has, the easier it will be for the company to pay the interest on the loan and repay the loan principal. Sweeter’s free cash flow is \[ \text{Free Cash Flow Amount} \], which is very **strong**.

Effect of Transactions on Cash Flows State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows: a. Retired $200,000 of bonds, on which there was $2,000 of unamortized discount, for $208,000. b. Sold 12,000 shares of $10 par common stock for $20 per share. c. Sold equipment with a book value of $51,800 for $74,600. d. Purchased land for $473,000 cash. e. Purchased a building by paying $90,000 cash and issuing a $100,000 mortgage note payable. f. Sold a new issue of $270,000 of bonds at 99. g. Purchased 3,600 shares of $15 par common stock as treasury stock at $29 per share. h. Paid dividends of $2.20 per share. There were 22,000 shares issued and 4,000 shares of treasury stock. Effect Amount Cash payment a. b. Cash receipt C. Cash receipt d. Cash payment Cash payment е. f. Cash receipt Cash payment g. h. Cash payment

Effect of Transactions on Cash Flows State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows: a. Retired $200,000 of bonds, on which there was $2,000 of unamortized discount, for $208,000. b. Sold 12,000 shares of $10 par common stock for $20 per share. c. Sold equipment with a book value of $51,800 for $74,600. d. Purchased land for $473,000 cash. e. Purchased a building by paying $90,000 cash and issuing a $100,000 mortgage note payable. f. Sold a new issue of $270,000 of bonds at 99. g. Purchased 3,600 shares of $15 par common stock as treasury stock at $29 per share. h. Paid dividends of $2.20 per share. There were 22,000 shares issued and 4,000 shares of treasury stock. Effect Amount Cash payment a. b. Cash receipt C. Cash receipt d. Cash payment Cash payment е. f. Cash receipt Cash payment g. h. Cash payment

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Km. 208.
Sweeter Enterprises Inc. has cash flows from operating activities of $539,000. Cash flows used for investments in property, plant, and equipment totaled $210,000, of which 75% of this investment was used to replace existing capacity.a. Determine the free cash flow for Sweeter Enterprises Inc.b. How might a lender use free cash flow to determine whether or not to giveSweeter Enterprises Inc. a loan?
AM. 37.
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