Question

Square Hammer Corp. shows the following information on its 2018 income statement: Sales = $398,000; Costs = $298,000; Other expenses = $7,900; Depreciation expense = $15,400; Interest expense = $14,200; Taxes = $21,875; Dividends = $11,500. In addition, you’re told that the firm issued $5,700 in new equity during 2018 and redeemed $4,200 in outstanding long-term debt.

Answer 1

Answer:

a. Operating Cash flow = 56,025

b. Cash flow to credit = 18,400

c. Cash flow to Stockholder = 5,800

d. There is no addition to Net Working capital if Fixed assets increased by $46,000.

Explanation:

a.

Operating Cash flow = Sales - Total cash Expenses

Operating Cash flow = Sales - ( Costs + Other Expenses + Interest Expense + Taxes )

Operating Cash flow = 398,000 - ( 298,000 + 7,900 + 14,200 + 21,875 )

Operating Cash flow = 398,000 - 341,975

Operating Cash flow = 56,025

b.

Cash flow to credit = Interest paid - Ending Long term debt + Beginning Long term debt

Cash flow to credit = 14,200 + 4200 + 0

Cash flow to credit = 18,400

c.

Cash flow to Stockholder = Dividend payment - New Stock Issued

Cash flow to Stockholder = 11,500 - 5,700

Cash flow to Stockholder = 5,800

d.

There is no addition to Net Working capital if Fixed assets increased by $46,000. As Fixed asset are not the part on Working capital. Working capital only account for the current assets and current liabilities.

Net Working Capital = Current Assets - Current Liabilities

Not: The requirement were missing in the question so the answer is made according to original question which is attached as a picture with this answer.