Each of the following events affects one or more tables in Sections. Show the effects of each
Question:
Each of the following events affects one or more tables in Sections. Show the effects of each event by adjusting the tables listed in parentheses:
a. Dynamic repays only $10 million of short-term debt in 2009.
b. Dynamic issues an additional $40 million of long-term debt in 2009 and invests $25 million in a new warehouse.
c. In 2009 Dynamic reduces the quantity of stuffing in each mattress. Customers don’t notice, but operating costs fall by 10%.
d. Starting in the third quarter of 2010, Dynamic employs new staff members who prove very effective in persuading customers to pay more promptly. As a result, 90% of sales are paid for immediately and 10% are paid in the following quarter.
e. Starting in the first quarter of 2010, Dynamic cuts wages by $20 million a quarter.
f. In the second quarter of 2010 a disused warehouse catches fire mysteriously. Dynamic receives a $50 million check from the insurance company.
g. Dynamic’s treasurer decides he can scrape by on a $10 million operating cash balance.
Step by Step Answer:
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen