Question

Hampton Industries had $70,000 in cash at year-end 2018 and $21,000 in cash at year-end 2019. The firm invested in property, plant, and equipment totaling $300,000 — the majority having a useful life greater than 20 years and falling under the alternative depreciation system. Cash flow from financing activities totaled +$170,000. Round your answers to the nearest dollar, if necessary.

1. What was the cash flow from operating activities? Cash outflow, if any, should be indicated by a minus sign.

   $  

2. If accruals increased by $10,000, receivables and inventories increased by $125,000, and depreciation and amortization totaled $29,000, what was the firm's net income?

   $  

Answer 1

a.
Calculation of cash flow from operating activities
Net change in cash during the year	Cash flow from operating activities+Cash flow from investing activities+Cash flow from financing activities
(21000-70000)	Cash flow from operating activities-300000+170000
-49000	Cash flow from operating activities-130000
-49000	Cash flow from operating activities-130000
Cash flow from operating activities	-49000+130000
Cash flow from operating activities	$81,000
Thus, cash flow from operating activities
b.
Calculation of net income of firm using cash flow from operating activities calculated.
Cash flow from operating activities	Net income+Depreciation expense+Increase in accruals-Decrease in receivables and inventory
81000	Net income+29,000+10,000-125,000
81000	Net income+29,000+10,000-125,000
81000	Net income-86,000
Net income	81000+86000
Net income	$167,000
Thus, firm's net income is $167,000.