Question

W.C. Cycling had $52,000 of cash at year-end 2011 and $21,000 in cash at year-end 2012. The firm invested in property, plant, and equipment totaling $280,000. Cash flow from financing activities totaled +$120,000. Round your answers to the nearest dollar, if necessary.

1. What was the cash flow from operating activities?
2. If accruals increased by $30,000, receivables and inventories increased by $140,000, and depreciation and amortization totaled $65,000, what was the firm's net income?

Answer 1

a. Change in cash = Cash at the end of the year - Cash at the beginning of the year = $21,000 - $52,000 = -$31,000

Change in cash = Cash flow from operating activities + Cash flow from investing activities + Cash flow from financing activities

-$31,000 = Cash flow from operating activities + (-$280,000) + $120,000

Cash flow from operating activities = -$31,000 + $280,000 - $120,000

Cash flow from operating activities = $129,000

b. Cash flow from operating activities = Net income + Depreciation/Amortization + Increase in accrued liabilities – Increase in accounts receivable and inventories

$129,000 = Net income + $65,000 + $30,000 - $140,000

Net income = $129,000 - $65,000 - $30,000 + $140,000

Net income = $174,000