Question

During the past year, ABC Inc. paid $36,800 in interest along with $2,000 in dividends. The...

During the past year, ABC Inc. paid $36,800 in interest along with $2,000 in dividends. The company issued $3,000 of stock and $16,000 of new debt. The company reduced the balance due on its old debt by $8,400. What is the amount of the cash flow to creditors?

$15,800

$29,200

$35,200

$39,200

$18,200

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Answer #2
Solution:
Answer is 2nd option $29,200
Working notes:
Notes: Cash flow to creditors are computed to know net how much of total cash outflows from the firm goes to creditors, for this it included interest expense, redemption old debt and issuance of new debt of the firm.
Cash flow to creditors   = Interest Expense + Redemption of old debt - New Debt issued
Cash flow to creditors   = $36,800 + $8,400 - $16,000
Cash flow to creditors   = $29,200
Please feel free to ask if anything about above solution in comment section of the question.
answered by: anonymous
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