Question

The December 31, 2018, balance sheet of Whelan, Inc., showed long-term debt of $1,420,000, $144,000 in the common stock account, and $2,690,000 in the additional paid-in surplus account. The December 31, 2019, balance sheet showed long-term debt of $1,620,000, $154,000 in the common stock account and $2,990,000 in the additional paid-in surplus account. The 2019 income statement showed an interest expense of $96,000 and the company paid out $149,000 in cash dividends during 2019. The firm's net capital spending for 2019 was $1,000,000, and the firm reduced its net working capital investment by $129,000.
What was the firm's 2019 operating cash flow, or OCF? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
Operating cash flow

Answer 1

Answer:

$606,000

Explanation:

For the computation of operating cash flow first we need to follow some steps which is shown below:-

Net New borrowing = Long-term Debt, 2019 - Long-term Debt, 2018

= $1,620,000 - $1420,000

= $200,000

Cash flow to creditors = Interest expense - Net new borrowings

= $96,000 - $200,000

= -$104,000

Net new equity = Common stock 2019 + Additional paid in surplus 2019 - Common stock 2018 + Additional paid in surplus 2018

= $154,000 + $2,990,000 - $144,000 - $2,690,000

= $310,000

Cash flow to stockholders = Dividend 2019 - Net new equity

= $149,000 - $310,000

= -$161,000

Cash flow from assets = Cash flow to creditors + Cash flow to stockholders

= -$104,000 + (-$161,000)

= -$265,000

and finally

Operating cash flow = cash flow from assets + Net capital spending + Change in Net working capital

= (-$265,000) + $100,000 + (-$129,000)

= $606,000