Question

Hampton Industries had $49,000 in cash at year-end 2018 and $29,000 in cash at year-end 2019. The firm invested in property, plant, and equipment totaling $200,000 — the majority having a useful life greater than 20 years and falling under the alternative depreciation system. Cash flow from financing activities totaled +$190,000. Round your answers to the nearest dollar, if necessary. What was the cash flow from operating activities? Cash outflow, if any, should be indicated by a minus sign. $ If accruals increased by $30,000, receivables and inventories increased by $100,000, and depreciation and amortization totaled $5,000, what was the firm's net income? $

Answer 1

Answer:

Cash flow from operating activities is $10,000

Net income is $85,000

Explanation:

1. The computation of the cash flow from operating activities is shown below:

We know that,

Net change in cash =  cash flow from operating activities + cash flow from investing activities + cash flow from financing activities

($29,000 - $49,000) =  cash flow from operating activities - $200,000 + $190,000

-$20,000 =  cash flow from operating activities - $10,000

So, cash flow from operating activities = $10,000

2. The computation of the net income equals to

Cash flow from operating activities = Net income + increased in accruals - increase in inventories and receivables + depreciation and amortization

$10,000 = Net income + $30,000 - $100,000 + $5,000

$10,000 = Net income - $75,000

So, the net income = $85,000