The December 31, 2009, balance sheet of Schism, Inc., showed long-term debt of $

Question

The December 31, 2009, balance sheet of Schism, Inc., showed long-term debt of $1.375 million, $135,000 in the common stock account and $2.6 million in the additional paid-in surplus account. The December 31, 2010, balance sheet showed long-term debt of $1.53 million, $145,000 in the common stock account and $2.9 million in the additional paid-in surplus account. The 2010 income statement showed an interest expense of $91,500 and the company paid out $140,000 in cash dividends during 2010. The firm’s net capital spending for 2010 was $910,000, and the firm reduced its net working capital investment by $120,000.

Explanation / Answer

Cash flow to creditors = interest paid – net new borrowing

Cash flow to creditors = interest paid – (ending long-term debt – beginning long-term debt)

Cash flow to creditors = 91500-(1530000-1375000)

Cash flow to creditors = -63500

Cash flow to stockholders = dividends paid – net new equity raised

Cash flow to stockholders =  Dividends paid - (ending common stock – beginning common stock)- (ending additional paid-incapital – beginning additional paid-in-capital)

Cash flow to stockholders = 140000 -(145000-135000)-(2900000-2600000)

Cash flow to stockholders = -170000

Cash Flow from Asset = Cash flow to stockholders + Cash flow to creditors

Cash Flow from Asset = 170000+63500

Cash Flow from Asset = 233500

Operating Cash Flow = Cash Flow from Asset + net capital spending - reduced its net working capital

Operating Cash Flow = 233500 + 910000-120000

Operating Cash Flow = $ 1,023,500

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.