Question

The December 31, 2018, balance sheet of Whelan, Inc., showed long-term debt of $1,380,000, $136,000 in the common stock account, and $2,610,000 in the additional paid-in surplus account. The December 31, 2019, balance sheet showed long-term debt of $1,540,000, $146,000 in the common stock account and $2,910,000 in the additional paid-in surplus account. The 2019 income statement showed an interest expense of $92,000 and the company paid out $141,000 in cash dividends during 2019. The firm’s net capital spending for 2019 was $920,000, and the firm reduced its net working capital investment by $121,000.

What was the firm's 2019 operating cash flow, or OCF? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)

Answer 1

Net New Long-term Debt = Long-term Debt, 2019 - Long-term Debt, 2018
Net New Long-term Debt = $1,540,000 - $1,380,000
Net New Long-term Debt = $160,000

Cash Flow to Creditors = Interest Expense - Net New Long-term Debt
Cash Flow to Creditors = $92,000 - $160,000
Cash Flow to Creditors = -$68,000

Net New Equity = Common Stock, 2019 + Additional Paid-in Surplus, 2019 - Common Stock, 2018 - Additional Paid-in Surplus, 2018
Net New Equity = $146,000 + $2,910,000 - $136,000 - $2,610,000
Net New Equity = $310,000

Cash Flow to Stockholders = Dividends - Net New Equity
Cash Flow to Stockholders = $141,000 - $310,000
Cash Flow to Stockholders = -$169,000

Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Cash Flow from Assets = (-$68,000) + (-$169,000)
Cash Flow from Assets = -$237,000

Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Net Increase in NWC
-$237,000 = Operating Cash Flow - $920,000 - (-$121,000)
Operating Cash Flow = $562,000