Question

Prescott Football Manufacturing had the following operating results for 2019: sales = $30,774; cost of goods sold = $21,956; depreciation expense = $3,596; interest expense = $604; dividends paid = $897. At the beginning of the year, net fixed assets were $20,394, current assets were $1,973, and current liabilities were $5,108. At the end of the year, net fixed assets were $23,257, current assets were $4,579, and current liabilities were $3,269. The tax rate for 2019 was 23 percent. What is the operating cash flow for 2019?
a. 7756
b. 3596
c. 4122
d. 7540
e. 8830

Answer 1

Answer:

The correct answer is option (A).

Explanation:

According to the scenario, the computation for the given data are as follows:

Operating cash flow = Sales - Cost of Goods Sold - Tax

Where, Tax = Sales - Cost of Goods Sold - Depreciation - Interest Expense × Rate of Tax

So, Tax = $30,774 - $21,956 - $3,596 - $604 × 23% = $1,062.14

By putting the value in the formula, we get

Operating Cash Flow = $30,774 - $21,956 - $1062.14

= $7,755.86

or = $7,756