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zysi [14]
2 years ago
6

During fiscal year 2019, Magic Kingdom had sales of $2 million. Its cost of goods sold, selling and general administrative expen

ses, and depreciation were $1.2 million, $.5 million and $.9 million, respectively. Its 7% semiannual coupon bonds will mature in 10 years, and there is no other debt. The tax rate is 21%, and tax losses cannot be carried forward or back. What is the operating cash flow for Magic Kingdom in fiscal year 2019?
Business
1 answer:
guajiro [1.7K]2 years ago
7 0

Answer:

$300,000  

Explanation:

The computation of the operating cash flow is shown below:

But before that EBIT should be determined

Sales $ 2,000,000.00  

Less : Cost of Goods Sold $1,200,000.00  

Gross Profit    $800,000.00  

Less:  selling and general administrative expenses $500,000.00  

Less: Depreciation expense $900,000.00  

EBIT i.e. Operating Income/(Loss) $(600,000.00)  

Tax at 21% $(126,000.00)

Since it is negative so the tax loss would not be determined  

Now Operating Cash flow

= EBIT × (1 -T) + Depreciation expense - Chane in Working Capital  

= EBIT + Depreciation expense

= -$600,000 + $900,000

= $300,000  

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1. Dr Material 80000

                    Cr Accounts payable 80000

         (Purchase material on account)

2. Dr Work in process 4000

                       Cr Material   4000

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                     Cr Accounts payable  56000

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4. Dr Accounts payable  80000

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5. Dr Work in process 68000

                          Cr Material  68000

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6. Dr Work in process  100000

                              Cr Wages payable  100000

    (Direct labor incurred)

7. Dr Factory overhead 106000

                  Cr Cash                  106000

( Paid cash on account of factory overhead)

8. Dr Work in process (100000*125%) 125000

              Cr Applied factory overhead             125000

( To record applied factory overhead)

9. Dr Factory overhead  50000

                             Cr Accumulated depreciation 50000

( To record depreciation on plant and equipment)

T-account

Cash                                                                             Material

Dr___________Cr__                                            __ DR ___________CR

                                                                                   148200     ---

           ---80000                                                          80000   ----    4000

          ---106000                                                            56000 ---

                                                                                                         -- 68000

Work in process                                                              Accounts payable

Dr____________Cr___                                          ___ DR ___________Cr                                                                                                        

33000 ---

4000---                                                                              80000        --  80000

68000--                                                                                               -- 56000

100000---

125000 ---

Wages payable                                                          Factory overhead

Dr ____________Cr__                                          __ Dr _____________Cr

            ---  100000                                                  106000 --

                                                                                50000 --

Applied factory overhead                                    Accumulated depreciation

Dr_____________Cr__                                          _ Dr ___________Cr_

          ---   1250000                                                                ---   50000

Finished goods                                                    Cost of goods sold

Dr_____________Cr__                                          _ Dr ___________Cr_

166000     ---                                                                         ---     263400

                ---   143200  

Material end =?  

Material (end) = 148200 +80000+56000-4000-68000=

Work in process (end) = ?

work in process  = 148200+166000-143200 =171000                                                                                

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