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cumulative spreadsheet analysis this assignment is based on the spreadsheet prepared 692631

Cumulative Spreadsheet Analysis

This assignment is based on the spreadsheet prepared in (1) of the cumulative spreadsheet assignment for Chapter 13. Review that assignment for a summary of the assumptions made in preparing a forecasted balance sheet, income statement, and statement of cash flows for 2009 for Skywalker Company. This assignment involves changing assumption (h) in the Chapter 13 assignment. Assume that Skywalker’s investment securities portfolio contains the following available for sale securities as of December 31, 2008:

 

Original Cost

Market Value,
12/31/05

Security A

$10

$22

Security B

25

18

Security C

5

8

Security D

40

15

Security E

1

7

Total 

$81

$70

 

As mentioned in the Chapter 13 assignment, Skywalker intends to invest another $28 in available for sale securities (security F) in 2009 in order to increase the total value of the portfolio by 40% to $98 ($70 + $28). Because Skywalker cannot predict future stock prices, the best forecast is that the market values of Securities A through E will remain the same during 2009 and that the market value of security F, to be acquired in 2009 for $28, will remain at $28. Revise the spreadsheet made in (1) of the Chapter 13 assignment in accordance with the above and following assumptions. In each case, any gains or losses expected to be realized in 2009 should be reported in a separate income statement line, “Investment income, net.”

1. Skywalker intends to sell security A in 2009 at an anticipated price of $22. That $22 will be used to buy security G. Skywalker’s best forecast is that the market value of security G will remain at $22 through the end of 2009.

2. How does the sale of security A in (1) impact expected cash from operating activities in 2009? Explain.

3. Repeat (1) and (2) assuming that, instead of selling security A, Skywalker intends to sell security D in 2009 at an anticipated price of $15, which will be used to buy security G. Skywalker’s best forecast is that the market value of security G will remain at $15 through the end of 2009.

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