Question

STATEMENT OF CASH FLOWS

Hampton Industries had $53,000 in cash at year-end 2015 and $14,000 in cash at year-end 2016. The firm invested in property, plant, and equipment totaling $280,000. Cash flow from financing activities totaled +$190,000. Round your answers to the nearest dollar, if necessary.

1. What was the cash flow from operating activities? Enter cash outflows with a minus sign.
   $   
   
2. If accruals increased by $15,000, receivables and inventories increased by $165,000, and depreciation and amortization totaled $41,000, what was the firm's net income?
   $   

Answer 1

Requirement (1) - Cash flow from operating activities

Net Change in Cash = Cash at the end of the year – Cash at the beginning of the year

= $14,000 - $53,000

= -$39,000

Net Change in Cash = Cash flows from operating activities + Cash flows from Investing activities + Cash flows from financing activities

-$39,000 = Cash flows from operating activities - $280,000 + $190,000

-$39,000 = Cash flows from operating activities - $90,000

Therefore, the Cash flows from operating activities = -$39,000 + $90,000

Cash flows from operating activities = $51,000

“The Cash flows from operating activities will be $51,000

Requirement (2) – Firm’s Net Income

Cash flows from operating activities = Net Income + Increase in accrual - Increase in Receivables & Inventories + Depreciation & Amortization Charges

$51,000 = Net Income + $15,000 - $165,000 + $41,000

$51,000 = Net Income - $109,000

Therefore, the Net Income = $51,000 + $109,000

Net Income = $160,000

“The firm’s Net Income will be $160,000”