Calculating Cash Flows [LO2] Zigs Industries had the following operating results

ID: 2630358 • Letter: C

Question

Calculating Cash Flows [LO2] Zigs Industries had the following operating results for 2011: sales = $27,360; cost of goods sold = $19,260; depreciation expense = $4,860; interest expense = $2,190; dividends paid = $1,560. At the beginning of the year, net fixed assets were $16,380, current assets were $5,760, and current liabilities were $3,240. At the end of the year, net fixed assets were $20,160, current assets were $7,116, and current liabilities were $3,780. The tax rate for 2011 was 34 percent.

Explanation / Answer

Profit & Loss Account

Sales = 27360

Less:-COGS = (19260)

Gross profit = 8100

Less:-Interest = (2190)

Less:-Depreciation = (4860)

Profit before tax = 1050

Less:- Tax @ 34% = (357)

Profit after tax = 693

Statement of Cash Flow

Particulars

Amount($)

Cash flow from Operating Activities

Profit After Tax

693

Add:-Depreciation

4860

Changes in Working Capital

Less:-Increase in Current Assets(7116-5760)

(1356)

Add:-Increase in Current Liabilities (3780-3240)

540

Less:-Tax paid

(357)

Cash inflow from operating Activities

4380

Cash flow from Investing Activities

Purchase of Fixed Assets [(20160+4860-16380)

(8640)

Net Cash outflow from Investing Activities

(8640)

Cash flow from Financing Activities

Dividend Paid

(1560)

Net Cash outflow from Financing Activities

(1560)

Net cash outflow (4380-8640-1560)

(5820) ..(Ans)