Question

The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,420,000, $144,000 in the common stock account and $2,690,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed long-term debt of $1,620,000, $154,000 in the common stock account and $2,990,000 in the additional paid-in surplus account. The 2014 income statement showed an interest expense of $96,000 and the company paid out $149,000 in cash dividends during 2014. The firm’s net capital spending for 2014 was $1,000,000, and the firm reduced its net working capital investment by $129,000. (Enter your answer as directed, but do not round intermediate calculations.)

Required:

What was the firm’s operating cash flow during 2014? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Operating cash flow

Answer 1

Net New Long-term Debt = Long-term Debt, 2014 - Long-term Debt, 2013
Net New Long-term Debt = $1,620,000 - $1,420,000
Net New Long-term Debt = $200,000

Cash Flow to Creditors = Interest Expense - Net New Long-term Debt
Cash Flow to Creditors = $96,000 - $200,000
Cash Flow to Creditors = -$104,000

Net New Equity = Common Stock, 2014 + Additional Paid-in Surplus, 2014 - Common Stock, 2013 - Additional Paid-in Surplus, 2013
Net New Equity = $154,000 + $2,990,000 - $144,000 - $2,690,000
Net New Equity = $310,000

Cash Flow to Stockholders = Dividends - Net New Equity
Cash Flow to Stockholders = $149,000 - $310,000
Cash Flow to Stockholders = -$161,000

Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Cash Flow from Assets = -$104,000 - $161,000
Cash Flow from Assets = -$265,000

Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Net Increase in NWC
-$265,000 = Operating Cash Flow - $1,000,000 - (-$129,000)
Operating Cash Flow = $606,000