Using the Baker Corporation’s balance sheets in Table 3.5, we see that its change in net fixed assets between 2002 and 2003 was+$200 ($1,200 in 2003 $1,000 in 2002). Substituting this value and the $100 of depreciation for 2003 into Equation 3.4, we get Baker’s net fixed asset investment (NFAI) for 2003:
NFAI=$200+$100=$300
Baker Corporation therefore invested a net $300,000 in fixed assets during 2003. This amount would, of course, represent a net cash outflow to acquire fixed assets during 2003.
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TABLE 3.5
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Baker Corporation Balance |
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December 31 |
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Assets |
2003 |
2002 |
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Current assets |
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|
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Cash |
$400 |
$300 |
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Marketable securities |
600 |
200 |
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Accounts receivable |
400 |
500 |
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Inventories |
600 |
900 |
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Total current assets |
$2,000 |
$1,900 |
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Gross fixed assets (at cost) |
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|
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Land and buildings |
$1,200 |
$1,050 |
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Machinery and equipment |
850 |
800 |
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Furniture and fixtures |
300 |
220 |
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Vehicles |
100 |
80 |
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Other (includes certain leases) |
50 |
50 |
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Total gross fixed assets (at cost) |
$2,500 |
$2,200 |
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Less: Accumulated depreciation |
1,300 |
1,200 |
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Net fixed assets |
$1,200 |
$1,000 |
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Total assets |
$3,200 |
$2,900 |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
$700 |
$500 |
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Notes payable |
600 |
700 |
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Accruals |
100 |
700 |
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Total current liabilities |
$1,400 |
200 |
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Long term debt |
$600 |
$1,400 |
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Total liabilities |
$2,000 |
$1,800 |
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Stockholders’ equity |
|
|
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Preferred stock |
$100 |
$100 |
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Common stock—$1.20 par, 100,000 shares |
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|
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outstanding in 2003 and 2002 |
120 |
120 |
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Paid in capital in excess of par on common stock |
380 |
380 |
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Retained earnings |
600 |
500 |
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Total stockholders’ equity |
$1,200 |
$1,100 |
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Total liabilities and stockholders’ equity |
$3,200 |
$2,900 |
Equation 3.4
NFAI=Change in net fixed assets + Depreciation