At the beginning of the year 2022 when it first started, DEFT Co. Ltd. has a cash balance of $2m on the asset side and shareholder equity of $2m on the liabilities and equity side. DEFT later bought a machine with a useful life of 10 years on 1 January 2022 for $800,000 paid with cash. Depreciation expense is calculated on a straight-line basis. During 2022, DEFT’s sole supplier of raw materials, Prompt Supply Co. Ltd supplies $5m worth of raw materials to DEFT. DEFT pays $3m to the supplier. DEFT revenue for the year is $10m, and the expenses related to raw materials, wages and utilities amount to $5m. The amount of raw materials that was used to generate the revenue for 2022 is $4m. DEFT collected $8m from customers in cash in 2022. Wages and utilities are fully paid for 2022. DEFT paid dividend of $1.4m in 2022. The tax rate is 20%.

As of 31 Dec 2022, what is the firm’s:

1. Cash balance

2. Actual net capital spending

3. Net income for 2022

Answer rating: 100% (QA)

1 Cash balance To calculate the cash balance as of December 31 2022 we need to start with the cash b... View the full answer