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20 September, 04:37

Jetson Spacecraft Corp. shows the following information on its 2015 income statement: sales = $316,547; costs = $219,406; other expenses = $8,481; depreciation expense = $18,633; interest expense = $14,216; taxes = $15,217; dividends = $10,678. In addition, you're told that the firm issued $5,629 in new equity during 2015 and redeemed $3,283 in outstanding long-term debt. If net fixed assets increased by $24,154 during the year, what was the addition to NWC?

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  1. 20 September, 05:36
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    Net working capital addition was for 8,108 dollars

    Explanation:

    To solve for NWC we start form the accounting equation and then, we expand it to get the NWC expression:

    Assets = Liabilies + Equity

    we expend the formula

    current assets + fixed assets = current liabliies + non-currnet liab + stock + RE

    NWC = net working capital

    being: current assets - current liabilities

    (current assets - current liabilities) = non-currnet liab + stock + RE - fixed assets

    NWC = - 3,283 + 5,629 + RE - 24,154

    We need to solve fotr the change in Retained Earnings:

    which is net income - dividends:

    sales 316,547

    costs (219,406)

    other expenses (8,481)

    depreciation expense (18,633)

    interest expense (14,216)

    taxes (15,217)

    net income 40,594

    dividends (10,678)

    change in RE 29,916

    NWC = - 3,283 + 5,629 + 29,916 - 24,154

    NWC = 8,108
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Home » Business » Jetson Spacecraft Corp. shows the following information on its 2015 income statement: sales = $316,547; costs = $219,406; other expenses = $8,481; depreciation expense = $18,633; interest expense = $14,216; taxes = $15,217; dividends = $10,678.
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