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 $700,000 in dividends to common shareholders. Throughout the year, the firm purchased $5.4 million of machinery that was needed for a new project. You have just spoken to the firm's accountants and learned that annual depreciation expense for the year is $440,000; however, the purchase price for 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 long- term debt of $1 million at a 5% interest rate. What was the firm's end-of-year cash balance? Recreate the firm's cash flow statement to arrive at your answer. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar, if necessary.
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 $700,000 in dividends to common shareholders. Throughout the year, the firm purchased $5.4 million of machinery that was needed for a new project. You have just spoken to the firm's accountants and learned that annual depreciation expense for the year is $440,000; however, the purchase price for 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 long- term debt of $1 million at a 5% interest rate. What was the firm's end-of-year cash balance? Recreate the firm's cash flow statement to arrive at your answer. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar, if necessary.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $700,000
in dividends to common shareholders. Throughout the
year, the firm purchased $5.4 million of machinery that
was needed for a new project. You have just spoken to
the firm's accountants and learned that annual
depreciation expense for the year is $440,000;
however, the purchase price for 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 long-
term debt of $1 million at a 5% interest rate. What was
the firm's end-of-year cash balance? Recreate the
firm's cash flow statement to arrive at your answer.
Write out your answer completely. For example, 5
million should be entered as 5,000,000. Round your
answer to the nearest dollar, if necessary.
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