Copyright

Titan Football Manufacturing had the following operating results for 2016: sales = $19,910; cost...

Question:

Titan Football Manufacturing had the following operating results for 2016: sales = $19,910; cost of goods sold = $13,850; depreciation expense = $2,240; interest expense = $280; dividends paid = $680. At the beginning of the year, net fixed assets were $20,300, current assets were $3,070, and current liabilities were $1,940. At the end of the year, net fixed assets were $24,140, current assets were $3,540, and current liabilities were $2,030. The tax rate for 2016 was 40%.

a. What is net income for 2016? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Net income $ _____

b. What is the operating cash flow for 2016? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Operating cash flow $ _____

c. What is the cash flow from assets for 2016? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Cash flow from assets $ _____

Assume no new debt was issued during the year.

d. What is the cash flow to creditors for 2016? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Cash flow to creditors $ _____

e. What is the cash flow to stockholders for 2016? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Cash flow to stockholders $ _____

Income Statement:

An income statement is a primary financial statement that indicates the financial performance of a company during a fiscal year by determining the net income or loss generated by the business. The net income is the excess of revenues over the expenses incurred to generate the revenues. By making adjustments to net income, the operating cash flow can be determined and free cash flow can be determined from the operating cash flow.

Answer and Explanation:


Answer:

The computations for Titan Football Manufacturing are made below:

a) The net income for 2016:

Net income $2,124

Computation:

Amount
Sales $19,910
Cost of goods sold $13,850
Depreciation expense $2,240
EBIT $3,820
Interest expense $280
EBT $3,540
Taxes @ 40% $1,416
Net income $2,124

b) The operating cash flow for 2016:

Operating cash flow $4,644

Computation:

  • Operating cash flow = EBIT + Depreciation expense - Taxes
  • Operating cash flow = $3,820 + $2,240 - $1,416
  • Operating cash flow = $4,644

c) The cash flow from assets for 2016:

Cash flow from assets -$1,816

Explanation:

The first step is to determine the changes in net working capital:

Computation:

  • Change in net working capital = (Ending current assets - Ending current liabilities) - (Beginning current assets - Beginning current liabilities)
  • Change in net working capital = ($3,540 - $2,030) - ($3,070 - $1,940)
  • Change in net working capital = $1,510 - $1,130
  • Change in net working capital = $380

The second step is to determine the net capital spending:

Computation:

  • Net capital spending = (Ending fixed assets - Beginning fixed assets) + Depreciation expense
  • Net capital spending = ($24,140 - $20,300 + $2,240)
  • Net capital spending = $6,080

The last step is to determine the cash flow from assets:

Computation:

  • Cash flow from assets = Operating cash flow - Change in net working capital - Net capital spending
  • Cash flow from assets = $4,644 - $380 - $6,080
  • Cash flow from assets = -$1,816

d) The cash flow to creditors for 2016:

Cash flow to creditors $280

Computation:

  • Cash flow to creditors = Interest expense - Net new borrowings
  • Cash flow to creditors = $280 - $0
  • Cash flow to creditors = $280

e) The cash flow to stockholders for 2016:

Cash flow to stockholders -$2,096

Computation:

  • Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
  • Cash flow to stockholders = -$1,816 - $280
  • Cash flow to stockholders = -$2,096

Learn more about this topic:

Loading...
What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
45K

Related to this Question

Explore our homework questions and answers library