Question

During 2014, Eagle Beach Company EBC) had sales of $1,000,000, cost of goods sold of $425,000, administrative and selling expenses of $95,000, depreciation expense of $140,000 and interest expense of $70,000. The tax rate is 35 percent. Ignore any tax loss carryback or carry forward provisions. What is the operating cash flow for EBC?

$385,500

$361,000

$340,000

Answer 1

Solution:

Eagle Beach Company
Computation of Net Income
Sales	$10,00,000
Less: Cost of Goods sold	$4,25,000
Less: Administrative expense	$95,000
Less: Depreciation expense	$1,40,000
Less: Interest expense	$70,000
Income Before taxes	$2,70,000
Less: Income Tax (35%)	$94,500
Net Income after Tax	$1,75,500

Eagle Beach Company
Computation of Operating Cash Flow
Net Income	$1,75,500
Add: Depreciation expense	$1,40,000
Add: Interest expense	$70,000
Operating Cash Flow	$3,85,500

Hence first option is correct.