Question

The December 31, 2015, balance sheet of Schism, Inc., showed long-term debt of $1,405,000, $141,000 in the common stock account, and $2,660,000 in the additional paid-in surplus account. The December 31, 2016, balance sheet showed long-term debt of $1,590,000, $151,000 in the common stock account, and $2,960,000 in the additional paid-in surplus account. The 2016 income statement showed an interest expense of $94,500 and the company paid out $146,000 in cash dividends during 2016. The firm’s net capital spending for 2016 was $970,000, and the firm reduced its net working capital investment by $126,000.
  
What was the firm's 2016 operating cash flow, or OCF? (A negative answer should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Answer 1

Cash Flow to Stockholders = Dividend - Net New Equity
Cash Flow to Stockholders = Dividend - (Ending Common Stock + Ending Additional Paid-in Surplus Account - Beginning Common Stock - Beginning Additional Paid-in Surplus Account)
Cash Flow to Stockholders = $146,000 - ($151,000 + $2,960,000 - $141,000 - $2,660,000)
Cash Flow to Stockholders = -$164,000

Cash Flow to Creditor = Interest - Net New Long-term Debt
Cash Flow to Creditor = Interest - (Ending Long-term Debt - Beginning Long-term Debt)
Cash Flow to Creditor = $94,500 - ($1,590,000 - $1,405,000)
Cash Flow to Creditor = -$90,500

Cash Flow from Assets = Cash Flow to Stockholders + Cash Flow to Creditors
Cash Flow from Assets = (-$164,000) + (-$90,500)
Cash Flow from Assets = -$254,500

Cash Flow from Assets = OCF - Net Capital Spending - Change in NWC
-$254,500 = OCF - $970,000 - (-$126,000)
-$254,500 = OCF - $970,000 + $126,000
OCF = $589,500

The OCF of the firm during 2016 is $589,500