Question

The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,280,000, $120,000 in the common stock account and $2,120,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed long-term debt of $1,410,000, $135,000 in the common stock account and $2,380,000 in the additional paid-in surplus account. The 2014 income statement showed an interest expense of $93,400 and the company paid out $135,000 in cash dividends during 2014. The firm’s net capital spending for 2014 was $640,000, and the firm reduced its net working capital investment by $105,000. (Enter your answer as directed, but do not round intermediate calculations.)

Required:

What was the firm’s operating cash flow during 2014?

Operating cash flow

$

Answer 1

Net New Borrowing = Ending Long-term Debt - Beginning Long-term Debt
Net New Borrowing = $1,410,000 - $1,280,000
Net New Borrowing = $130,000

Cash Flow to Creditors = Interest Expense - Net New Borrowing
Cash Flow to Creditors = $93,400 - $130,000
Cash Flow to Creditors = -$36,600

Net New Equity Raised = Ending Common Stock + Ending Additional Paid-in Capital - Beginning Common Stock - Beginning Additional Paid-in Capital
Net New Equity Raised = $135,000 + $2,380,000 - $120,000 - $2,120,000
Net New Equity Raised = $275,000

Cash Flow to Stockholders = Dividend - Net New Equity Raised
Cash Flow to Stockholders = $135,000 - $275,000
Cash Flow to Stockholders = -$140,000

Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Cash Flow from Assets = -$36,600 - $140,000
Cash Flow from Assets = -$176,600

Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Additions to NWC
-$176,600 = Operating Cash Flow - $640,000 - (-$105,000)
Operating Cash Flow = $358,400