Chapter 3, Problem 13P

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Chapter
Section

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

# STATEMENT OF CASH FLOWS You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company headquarters (where all of the firm’s records are kept) has been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statement for the year just ended. The firm had \$100,000 in the bank at the end of the prior year, and its working capital accounts except cash remained constant during the year. It earned \$5 million in net income during the year but paid \$800,000 in dividends to common shareholders. Throughout the year, the firm purchased 55.5 million of machinery that was needed for a new project. You have just spoken to the firm’s accountants and learned that annual depreciation expense for the year is \$450,000; however, the purchase price for the machinery represents additions to property, plant, and equipment before depredation. Finally, you have determined that the only financing done by the firm was to issue long-term debt of \$1 million at a 6% interest rate. What was the firm’s end-of-year cash balance? Recreate the firm’s cash flow statement to arrive at your answer.

Summary Introduction

To prepare: Cash flow statement of Company B.

Introduction:

Statement of Cash Flow:

The statement of cash flow is a part of the financial statements that are included in the annual report of a company. It reports the cash generated or used by the business in a specified period.

Explanation

Cash flow statement for Company B:

 Particulars Amount (\$) Operating Activities Ā Net income 5,000,000 Depreciation and amortization 450,000 Net cash provided by operating activities 5,450,000 Ā Ā Long-Term Investing Activities Ā Machinery purchas...

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Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)