The 2008 balance sheet of Maria\'s Tennis Shop, Inc., showed $2.6 million in lon
ID: 2794965 • Letter: T
Question
The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $2.6 million in long-term debt, $750,000 in the common stock account, and $6.2 million in the additional paid-in surplus account. The 2009 balance sheet showed $4.2 million, $935,000, and $7.8 million in the same three accounts, respectively. The 2009 income statement showed an interest expense of $310,000. The company paid out $520,000 in cash dividends during 2009. If the firm's net capital spending for 2009 was $670,000, and the firm reduced its net working capital investment by $155,000, the firm's 2009 operating cash flow, or OCF? $2,865,000 $-2,040,000 $-4,110,000 $-3,080,000 $-2,555,000
Explanation / Answer
Cash Flow to Creditor =Interest - [EDNING long term debt - beginning long term debt]
= 310,000- [4,200,000- 2,600,000]
= 310,000- 1,600,000
= - 1,290,000
cash flow to stockholders =Dividend paid -[Ending equity -beginning equity ]
= 520,000 - [(935000+7800000)-(750000+6200000)]
= 520000- [8735000-6950000]
= 520000- 1785000
= - 1265000
Cash flow from asset =cash flow to creditors +cash flow to stockholders
= -1290000-1265000
= -2555000
cash flow from asset =Operating cash flow -net capital spending -net working capital
- 2555000= OCF -670000-(-155000)
OCF = -2555000+670000-155000
= -2040000
Correct option is "B"
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