The December 31, 2015, balance sheet of Schism, Inc., showed a long-term debt of $1,415,000, and...

Question:

The December 31, 2015, balance sheet of Schism, Inc., showed a long-term debt of $1,415,000, and December 31, 2016, balance sheet showed a long-term debt of $1,610,000. The 2016 income statement showed an interest expense of $95,500.

What was the firm's cash flow to creditors during 2016?

Long-Term Debt:

The debt represents an amount that a company owes to another company and can be classified as short-term debt if the amount borrowed will be repaid within a year and if the repayment period exceeds one year, then the debt will be classified as long-term. The lender also called as creditor gets a fixed interest income on the amount lent which is nothing but the cashflow to the creditors of the company.

Answer and Explanation:

Answer:

Schism, Inc's cash flow to creditors during 2016 is -$99,500.

Explanation:

Schism, Inc has provided that:

  • Beginning balance in Long-term debt = $1,4150,000
  • Ending balance in Long-term debt = $1,610,000
  • Amount of Interest paid = $95,500

Computation:

Cash flow to creditors = Interest paid - (Long-term debt ending balance - Long-term debt beginning balance)

Cash flow to creditors = $95,500 - ($1,610,000 - $1,4150,000)

Cash flow to creditors = -$99,500


Learn more about this topic:

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Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

Chapter 8 / Lesson 7
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