Question

Torche Corporation had Net Income for 2017 of $9,400,000. The firm invested $2,000,000 in manufacturing equipment during 2017. The equipment is being depreciated over five years using straight-line depreciation, starting in 2017. Assuming no other adjustments to cash flow than those mentioned here, create a statement of cash flows for 2017 with amounts in thousands. What is the Net Cash Flow in 2017? Please specify your answer in the same units as the statement of cash flows.

Answer 1

                        Torche Corporation Statement of cash flow

Operating activities:

     Net Income............................................9,400,000

   Add: Depreciation expenses ..................   400,000

(2,000,000 / 5 = 400,000)

            Net Cash provided by operating activities ...(A)...................... 9,800,000

Investment Activity:

          Equipment purchased ................................ (1,600,000)

           Net cash from Investment activity...................(B)..................... (1,600,000)

Net cash flow is .......................(A+B)     ............................................... 8,200,000

Note : The given information purchased equipment during the year 2017 is $2,000,000 and Depreciation is calculated on straight line method, so Depreciation for the year 2017 is $2,000,000 / 5 years = $400,000. Hence at the end of the year the value of equipment is $2,000,000 - $400,000 = $1,600,000 is taken in to consideration.