Question

Piper Co had sales of $600,000, cost of good sold of $300,000, selling general and admin. expenses of $125,000 depreciation expense of $75,000 and an interest expense of $10,000. If the tax rate is 21%, calculate the operating cash flow (OCF).

Answer 1

$156,100

Step-by-step explanation:

The computation of the operating cash flow is shown below:

= Earning after tax + interest expense + depreciation expense

where,

Earning after taxes = Sales - cost of goods sold - selling and administrative expenses - depreciation expenses - interest expenses - income tax expense

= $600,000 - $300,000 - $125,000 - $75,000 - $10,000 - $18,900

= $71,100

income tax expense is

= (Sales - cost of goods sold - selling and administrative expenses - depreciation expenses - interest expenses) × income tax rate

= ( $600,000 - $300,000 - $125,000 - $75,000 - $10,000) × 21%

= $90,000 × 21%

= $18,900

So, the operating cash flow is

= $71,100 + $10,000 + $75,000

= $156,100