Question

An investor contributes $100,000 of cash to a partnership and signs a $200,000 recourse note. During the first year, the investor is allocated partnership income of $80,000, debt service expense of $30,000 consisting of $20,000 of interest and $10,000 of principal amortization, operating expenses of $40,000 and depreciation expense of $65,000.

The "net cash flow" from operations for the year is ____.

Answer 1

net cash flow = $10000

Step-by-step explanation:

given data

contributes cash = $100,000

partnership income = $80,000

debt service expense = $30,000

interest = $20,000

principal amortization = $10,000

operating expenses = $40,000

depreciation expense = $65,000

solution

we know that Depreciation is not cash flow so we will exclude it

so for cash flow get here as = income minus all cash cost

so

cash flow = income - interest expenses - operating expenses .........1

cash flow = $80,000 - $20,000 - $40,000

cash flow = $20,000

and here additional paid out = $10,000 for reduce loan balance

so as that net cash flow = $20000 - $10000

net cash flow = $10000