AOS Industries Statement of Cash Flows for 2008 Operating Activities

question 25

Multiple Choice

AOS Industries Statement of Cash Flows for 2008 Operating activities
Net Income 3.2
Depreciation and amortization 1.4
Cash effect of changes in
Accounts receivable -2.1
Accounts payable 1.1
Inventory -0.8
Cash from operating activities 2.8
Investment activities
Capital expenditures -2.2
Acquisitions and other investing activity -0.4
Cash from investing activities -2.6
Financing activities
Dividends paid -1.5
Sale or purchase of stock 2.1
Increase in short-term borrowing 1.4
Increase in long-term borrowing 3.2
Cash from financing activities 5.2
Change in Cash and Cash Equivalents 5.4
Consider the above statement of cash flows. In 2008, AOS Industries had contemplated buying a new warehouse for $3 million, the cost of which would be depreciated over 10 years. If AOS Industries has a tax rate of 25%, what would be the impact for the amount of cash held by AOS at the end of the 2008?

• A)It would have $3,000,000 less cash at the end of 2008.
• B)It would have $2,925,000 less cash at the end of 2008.
• C)It would have $1,500,000 less cash at the end of 2008.
• D)It would have an additional $7,500,000 in cash at the end of 2008.

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Definitions:

Extraction Costs

The expenses associated with the removal of raw materials from the earth, such as labor, energy, and equipment costs.

Rare Earth Metals

Rare earth metals are a group of seventeen elements used in the manufacture of a variety of advanced technological devices, characterized by their scarcity and unique electronic properties.

Supply Curve

represents the relationship between the price of a good or service and the quantity of that good or service that suppliers are willing to offer for sale, holding all else constant.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price in a given time period.