The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $
ID: 2815776 • Letter: T
Question
The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,280,000, $120,000 in the common stock account and $2,120,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed long-term debt of $1,410,000, $135,000 in the common stock account and $2,380,000 in the additional paid-in surplus account. The 2014 income statement showed an interest expense of $93,400 and the company paid out $135,000 in cash dividends during 2014. The firm’s net capital spending for 2014 was $640,000, and the firm reduced its net working capital investment by $105,000. (Enter your answer as directed, but do not round intermediate calculations.)
What was the firm’s operating cash flow during 2014?
The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,280,000, $120,000 in the common stock account and $2,120,000 in the additional paid-in surplus account. The December 31, 2014, balance sheet showed long-term debt of $1,410,000, $135,000 in the common stock account and $2,380,000 in the additional paid-in surplus account. The 2014 income statement showed an interest expense of $93,400 and the company paid out $135,000 in cash dividends during 2014. The firm’s net capital spending for 2014 was $640,000, and the firm reduced its net working capital investment by $105,000. (Enter your answer as directed, but do not round intermediate calculations.)
Explanation / Answer
Net New Borrowing = Ending Long-term Debt - Beginning Long-term Debt
Net New Borrowing = $1,410,000 - $1,280,000
Net New Borrowing = $130,000
Cash Flow to Creditors = Interest Expense - Net New Borrowing
Cash Flow to Creditors = $93,400 - $130,000
Cash Flow to Creditors = -$36,600
Net New Equity Raised = Ending Common Stock + Ending Additional Paid-in Capital - Beginning Common Stock - Beginning Additional Paid-in Capital
Net New Equity Raised = $135,000 + $2,380,000 - $120,000 - $2,120,000
Net New Equity Raised = $275,000
Cash Flow to Stockholders = Dividend - Net New Equity Raised
Cash Flow to Stockholders = $135,000 - $275,000
Cash Flow to Stockholders = -$140,000
Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Cash Flow from Assets = -$36,600 - $140,000
Cash Flow from Assets = -$176,600
Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Additions to NWC
-$176,600 = Operating Cash Flow - $640,000 - (-$105,000)
Operating Cash Flow = $358,400
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