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Hampton Industries had $70,000 in cash at year-end 2018 and $21,000 in cash at year-end 2019....

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Finance

Hampton Industries had $70,000 in cash at year-end 2018 and$21,000 in cash at year-end 2019. The firm invested in property,plant, and equipment totaling $300,000 — the majority having auseful life greater than 20 years and falling under the alternativedepreciation system. Cash flow from financing activities totaled+$170,000. Round your answers to the nearest dollar, ifnecessary.

  1. What was the cash flow from operating activities? Cash outflow,if any, should be indicated by a minus sign.

    $  

  2. If accruals increased by $10,000, receivables and inventoriesincreased by $125,000, and depreciation and amortization totaled$29,000, what was the firm's net income?

    $  

Answer & Explanation Solved by verified expert
3.9 Ratings (592 Votes)

a.
Calculation of cash flow from operating activities
Net change in cash during the year Cash flow from operating activities+Cash flow from investing activities+Cash flow from financing activities
(21000-70000) Cash flow from operating activities-300000+170000
-49000 Cash flow from operating activities-130000
-49000 Cash flow from operating activities-130000
Cash flow from operating activities -49000+130000
Cash flow from operating activities $81,000
Thus, cash flow from operating activities
b.
Calculation of net income of firm using cash flow from operating activities calculated.
Cash flow from operating activities Net income+Depreciation expense+Increase in accruals-Decrease in receivables and inventory
81000 Net income+29,000+10,000-125,000
81000 Net income+29,000+10,000-125,000
81000 Net income-86,000
Net income 81000+86000
Net income $167,000
Thus, firm's net income is $167,000.
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