Question

The 2017 balance sheet of Kerber’s Tennis Shop, Inc., showed long-term debt of $2.6 million, and the 2018 balance sheet showed long-term debt of $3.75 million. The 2018 income statement showed an interest expense of $370,000. What was the firm's cash flow to creditors during 2018?

Answer 1

cash flow = - $780000

Step-by-step explanation:

given data

2017 debt = $2.6 million

2018 debt = $3.75 million

interest expense = $370,000

to find out

What was the firm's cash flow to creditors

solution

first we get net new debt that is express as

Net new deb = 2018 debt - 2017 debt .....................1

Net new debt = $3.75 million - $2.6 million

Net new debt = $1.15 million

so

cash flow to creditors will be here as

cash flow = Interest expense - Net new debt .............2

cash flow = $370,000 - $1.15 million

cash flow = - $780000