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The December 31, 2015, balance sheet of Schism, Inc., showed long-term debt of $

ID: 2815777 • Letter: T

Question

The December 31, 2015, balance sheet of Schism, Inc., showed long-term debt of $1,385,000, $137,000 in the common stock account, and $2,620,000 in the additional paid-in surplus account. The December 31, 2016, balance sheet showed long-term debt of $1,550,000, $147,000 in the common stock account, and $2,920,000 in the additional paid-in surplus account. The 2016 income statement showed an interest expense of $92,500 and the company paid out $142,000 in cash dividends during 2016. The firm’s net capital spending for 2016 was $930,000, and the firm reduced its net working capital investment by $122,000.
  
What was the firm's 2016 operating cash flow, or OCF? (A negative answer should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Operating cash flow            $

Explanation / Answer

Net New Borrowing = Ending Long-term Debt - Beginning Long-term Debt
Net New Borrowing = $1,550,000 - $1,385,000
Net New Borrowing = $165,000

Cash Flow to Creditors = Interest Expense - Net New Borrowing
Cash Flow to Creditors = $92,500 - $165,000
Cash Flow to Creditors = -$72,500

Net New Equity Raised = Ending Common Stock + Ending Additional Paid-in Capital - Beginning Common Stock - Beginning Additional Paid-in Capital
Net New Equity Raised = $147,000 + $2,920,000 - $137,000 - $2,620,000
Net New Equity Raised = $310,000

Cash Flow to Stockholders = Dividend - Net New Equity Raised
Cash Flow to Stockholders = $142,000 - $310,000
Cash Flow to Stockholders = -$168,000

Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Cash Flow from Assets = -$72,500 - $168,000
Cash Flow from Assets = -$240,500

Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Additions to NWC
-$240,500 = Operating Cash Flow - $930,000 - (-$122,000)
Operating Cash Flow = $567,500

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