Question

The Blossom Company has disclosed the following financial information in its annual reports for the period ending March 31, 2017: sales of $1.452 million, cost of goods sold of $801,000, depreciation expenses of $175,000, and interest expenses of $89,575. Assume that the firm has an average tax rate of 35 percent. Compute the cash flows to investors from operating activity. (Round answer to 2 decimal places, e.g. 15.25.)

Answer 1

Answer:

See below

Explanation:

See computation of cash flow below

Sales

$1,452,000

Less:

Cost of goods sold

(801,000)

Gross profit

$651,000

Less:

Depreciation

($175,000)

Interest expense

($89,575)

Earnings before tax(EBT)

$386,425

Less:

Tax 35% × $386,425

($135,249)

Add:

Depreciation

$175,000

Cash flow

$426,176

Therefore, cash flow to investors from operating activities is $426,176