Question

Hampton Industries had $67,000 in cash at year-end 2015 and $18,000 in cash at year-end 2016. The firm invested in property, plant, and equipment totaling $150,000. Cash flow from financing activities totaled +$150,000. Round your answers to the nearest dollar, if necessary.

1. What was the cash flow from operating activities? Enter cash outflows with a minus sign.
   
2. If accruals increased by $45,000, receivables and inventories increased by $175,000, and depreciation and amortization totaled $39,000, 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 = $18,000 - $67,000 = -$49,000

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

-$49,000 = Cash flow from operating activities + (-$150,000) + $150,000

Cash flow from operating activities = -$49,000 + $150,000 - $150,000

Cash flow from operating activities = -$49,000

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

-$49,000 = Net income + $39,000 + $45,000 - $175,000

Net income = -$49,000 - $39,000 - $45,000 + $175,000

Net income = $42,000