Question

W.C. Cycling had $55,000 in cash at year-end 2007 and $25,000 in cash at year-end 2008. Cash flow from long-term investing activities totaled _$250,000, and cash flow from financing activities totaled $170,000. Required: a) What was the cash flow from operating activities? b) If accruals increased by $25,000, receivables and inventories increased by $100,000, and depreciation and amortization totaled $10,000, what was the firm's net income?

Answer 1

a) 50,000

b) 115,000

Step-by-step explanation:

Cash flow from operating activities and Net Income can be calculated as follows

DATA

Opening cash balance = $55,000

Closing cash balance = $25,000

Long term investing activities = $250,000

Cashflow from financing activities = $170,000

Requirement A: Cash flow from operating activities

$

Investment 250,000

Less:

Cash flow from financing activities (170,000)

Opening Cash balance (55,000)

Add:

Closing cash balance 25,000

Operating cash flows 50,000

Requirement B: Net Income

Operating cash flows 50,000

Add:

Increase in receivables and inventory 100,000

Less:

Increase in accruals 25,000

Depreciation 10,000

Net Income 115,000