Question

JK Meadows has beginning current liabilities of $14,602 and total liabilities of $35,418. At the end of the year, the current liabilities are $15,311 and the total liabilities are $37,604. During the year, the firm paid $680 in dividends and $1,320 in interest. What is the cash flow to creditors?

Answer 1

-$157

Step-by-step explanation:

Beginning long term debt = $35,418 - $14,602

Beginning long term debt = $20,816

Ending long term debt = $37,604 - $15,311

Ending long term debt = $22,293

Net change in borrowing = Ending long term debt - Beginning long term debt

Net change in borrowing = $22,293 - $20,816

Net change in borrowing = $1,477

Cash flow to creditors = Interest paid - Net new borrowing

Cash flow to creditors = $1,320 - $1,477

Cash flow to creditors = -$157