Answer and Explanation:
The computation is shown below:
a. Cash Flow to Creditors
Cash Flow to Creditors = Interest Expenses Paid – Net Increase in Long term debt
= Interest Expenses Paid – [Long term debt at the end – Long term Debt at the Beginning]
= $175,000 – [$2,350,000 - $2,500,000
= $175,000 - (-$150,000)
= $325,000
b. Cash Flow to Stockholders
Cash Flow to Stockholders = Dividend Paid – Net New Equity
= Dividend Paid – [(Ending common stock balance + Additional paid-in surplus account at the end) - (Beginning common stock balance + Additional paid-in surplus account at the beginning)
= $635,000 – [($955,000 + $3,600,000) – ($725,000 + $3,750,000)]
= $635,000 – [$4,555,000 - $4,475,000]
= $635,000 - $80,000
= $555,000
c. Cash Flow from assets
Cash Flow from assets = Cash Flow to Creditors + Cash Flow to Stockholders
= $325,000 + $555,000
= $880,000
d. Operating Cash Flow
As We know that,
Cash flow from assets = Operating Cash flows – Change in Net Working capital – Net Capital Spending
$880,000 = Operating cash flow - ($65,000) - $500,000
So,
Operating cash flow = $880,000 + $65,000 + $500,000
= $1,445,000
