You have just been hired as a financial analyst for BarringtonIndustries. Unfortunately, company headquarters (where all of the firm’s records are kept)has been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statementfor the year just ended. The firm had $100,000 in the bank at the end of the prioryear, and its working capital accounts except cash remained constant during the year. Itearned $5 million in net income during the year but paid $800,000 in dividends to commonshareholders. Throughout the year, the firm purchased $5.5 million of machinery thatwas needed for a new project. You have just spoken to the firm’s accountants and learnedthat annual depreciation expense for the year is $450,000; however, the purchase price forthe machinery represents additions to property, plant, and equipment before depreciation.Finally, you have determined that the only financing done by the firm was to issue longtermdebt of $1 million at a 6% interest rate. What was the firm’s end-of-year cash balance?Recreate the firm’s cash flow statement to arrive at your answer.
You have just been hired as a financial analyst for Barrington
Industries. Unfortunately, company headquarters (where all of the firm’s records are kept)
has been destroyed by fire. So, your first job will be to recreate the firm’s cash flow statement
for the year just ended. The firm had $100,000 in the bank at the end of the prior
year, and its working capital accounts except cash remained constant during the year. It
earned $5 million in net income during the year but paid $800,000 in dividends to common
shareholders. Throughout the year, the firm purchased $5.5 million of machinery that
was needed for a new project. You have just spoken to the firm’s accountants and learned
that annual
the machinery represents additions to property, plant, and equipment before depreciation.
Finally, you have determined that the only financing done by the firm was to issue longterm
debt of $1 million at a 6% interest rate. What was the firm’s end-of-year cash balance?
Recreate the firm’s cash flow statement to arrive at your answer.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
