2. 3. 4. Slide 39 Additional Pr s with Answers Problem 5 Cash Flow from Operatin
ID: 2796471 • Letter: 2
Question
2. 3. 4. Slide 39 Additional Pr s with Answers Problem 5 Cash Flow from Operating Activities: The Mid-American Farm Products Corporation provided the following financial information for the quarter ending September 30, 2014: Depreciation and amortization $75,000 Net Income $225,000 in receivables $95,000 Increase in inventory $69,000 Increase in accounts payables $80,000 Decrease in marketable securities $34,000. What is the cash flow from operating activities generated during this quarter by the firm?Explanation / Answer
Ans. Problem 5
Calculation of Cash flow from Operating Activities
Net Income $225000
Add:Dep. and Amortisatio $75000
Add: Decrease of Receivable* $95000
Less:Increase of inventory ($69000)
Add: Increase of account payable $80000
Add: Decrease Market securities $34000
Cash flow from Operating Activities $440000
*Receivable is not visible wheather decrease or increase, so i assume it is decrease and I added to cash flow, but in case it increase we will require to Less instead to Add.
Ans. Problem 4
Calculation of working Capital = Current Assets-Current Liabilities
Step 1: Calculation of Current Assets
Cash and cash Equivalent $1125000
Inventory $625000
Account Receivable $3500000
other Current Assets $125000
Total Current Assets $5375000
Calculation of Current liabilities
Account payable $3200000
Notes payable $1200000
Total current liabilities $4400000
Working Capital =$5375000-$4400000= $975000
Ans. Problem 3
Statement of Retained Earning
Opening Balance of Retained Earning $425000
Add: Profit During the yr after tax $820000
Less: Dividend paid during the yr (820000X.35) ($287000)
Closing Balance of Retained Earning $958000
Ans. Problem 2
Calculation of Net Income After Tax
Revenue $925000
Less:
Operating exp. $325000
Depreciation $125000
Interest $55000
PBT $420000
Less: Tax $142800
PAT $277200
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