Salza Technology Corporation increased its sales from $375,000 in 2009 to $450,000 in 2010 as shown in the firm’s income statements presented below. LeAnn Sands, chief executive officer and founder of the firm, expressed concern that the cash account and the firm’s marketable securities declined substantially between 2009 and 2010. Salza’s complete balance sheets are also shown. Ms. Sands is seeking your assistance in the preparation of a statement of cash flows for Salza Technology.

A. Prepare a statement of cash flows for 2010 for Salza Technology Corporation.

B. Provide a brief description of what happened in terms of cash flows (both inflows and outflows) for Salza between 2009 and 2010.

C. Use your calculations from Part A for cash flows from operating and investing activities to indicate the extent to which Salza was building or burning cash in 2010.
D. Convert the 2010 annual cash build or cash burn to a monthly rate. If cash flow activities relating to operations and investing for 2010 continue into 2011, indicate
(1) How long it will be before Salza runs out of cash (if Salza is burning cash) or
(2) The expected 2011 year-end cash account balance if Salza is building cash. Assume no changes in cash flows from financing activities in 2011 for calculationpurposes.

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SALZA TECHNOLOGY CORPORATION ANNUAL INCOME STATEMENTS IN $ THOUSANDS) 2009 2010 Net sales Less: Cost of goods sold Gross profit Less: Operating expenses Less: Depreciation Less: Interest Income before taxes Less: Income taxes Net income Cash dividends $375 225 150 S450 270 180 30 100 75 20 BALANCE SHEETS AS OF DECEMBER 31 (IN THOUSANDS) 2009 2010 S 39 50 151 240 200 95 S 16 Accounts receivable Inventories Total current assets Gross fixed assets 300 290 125 Less accumulated depreciatiorn 105 345 S 30 20 10 60 15 85 185 $345 165 65 S 45 27 23 95 Net fixed assets Total assets Accounts payable Bank loan Accrued liabilities Total current liabilities Long-term debt Common stock Retained earnings 120 Total liabilities and equity $465