Question

Hampton Industries had $47,000 in cash at year-end 2018 and $19,000 in cash at year-end 2019. The firm invested in property, plant, and equipment totaling $100,000 — the majority having a useful life greater than 20 years and falling under the alternative depreciation system. Cash flow from financing activities totaled +$220,000. Round your answers to the nearest dollar, if necessary.

Required:
a. What was the cash flow from operating activities?
b. If accruals increased by $45,000, receivables and inventories increased by $155,000, and depreciation and amortization totaled $53,000, what was the firm's net income?

Answer 1

a)

net cash decrease between 2018 and 2019 = $19,000 - $47,000 = -$28,000

net cash decrease = operating cash flow + investing cash flow + financing cash flow

-$28,000 = operating cash flow - $100,000 + $220,000

-$28,000 = operating cash flow + $120,000

operating cash flow = -$148,000

b)

operating cash flow = net income + depreciation expense + increase in accruals - increase in inventories and receivables

-$148,000 = net income + $53,000 + $45,000 - $155,000

-$148,000 = net income - $57,000

net income = -$91,000 (net loss)