Question 15 of 1 Click here to read the eBook: Statement of Cash Flows STATEMENT
ID: 2814198 • Letter: Q
Question
Question 15 of 1 Click here to read the eBook: Statement of Cash Flows STATEMENT OF CASH FLOWS You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company headquarters (where all of has been destroyed by fire. So, your first job will be at the end of the prior year, and its working capital accounts except cash remained constant during the yea year but paid $700,000 in dividends to common shareholders. Throughout the year new project. You price for the machinery represents done by the firm was to issue long-term debt of $1 flow statement to arrive at your answer. Write out your answer completely. For example. the nearest dollar, if necessary. to recreate the firm's cash flow statement for the year just ended. The firm had $100,000 in the bank r. It earned $5 million in net income during the 5.5 million of machinery that was needed for a have just spoken to the firm's accountants and learned that annual depreciation expense for the year is s450,000; however, the purchase plant, and equipment before depreciation. Finally, you have determined that the only financing at a 5% interest rate. What was the firm's end-of-year cash balance? Recreate the firm's cash milion S million should be entered as 5,000,000. Round your answer toExplanation / Answer
Firms cash flow can be calculated by adding the prior year's cash balance to all the inflows and subtracting the outflows -
Please note that depreciation is a non-cash expense and hence has to be added back
Prior year cash balance ($100,000) + Profit ($5,000,000) - Dividends paid ($700,000) - Purchase of machinery ($5,500,000) + Depreciation ($450,000) + Additional borrowing Debt ($1,000,000)
= 350,000