For Year 2016,Precision Masters had sales of $42,900,cost of goods sold of $26,800,depreciation expense of $1,900,interest expense of $1,300,and dividends paid of $1,000.At the beginning of the year,net fixed assets were $14,300,current assets were $8,700,and current liabilities were $6,600.At the end of the year,net fixed assets were $13,900,current assets were $9,200,and current liabilities were $7,400.The tax rate was 34 percent.What is the cash flow from assets for 2016?
A)$9,914
B)$11,114
C)$9,360
D)$10,514
E)$11,970

Question

For Year 2016,Precision Masters had sales of $42,900,cost of goods sold of $26,800,depreciation expense of $1,900,interest expense of $1,300,and dividends paid of $1,000.At the beginning of the year,net fixed assets were $14,300,current assets were $8,700,and current liabilities were $6,600.At the end of the year,net fixed assets were $13,900,current assets were $9,200,and current liabilities were $7,400.The tax rate was 34 percent.What is the cash flow from assets for 2016?
A)$9,914
B)$11,114
C)$9,360
D)$10,514 
E)$11,970

Quizplus · Accepted Answer

Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
Cash flow to creditors = Interest expense - Net new borrowing
= $1,300 - [($7,400 - $6,600) + ($14,300 - $13,900)]
= $1,300 - $1,200
= $100

Cash flow to stockholders = Dividends paid - Net new equity raised
= $1,000 - [($9,200 - $8,700) + ($13,900 - $14,300) - $1,900*(1-0.34)]
= $1,000 - $10 + $250
= $1,240

Cash flow from assets = $100 + $1,240
= $1,340

Now, to get the cash flow from assets, we need to add back depreciation expense, which was subtracted while calculating net income.

Cash flow from assets = $1,340 + $1,900
= $3,240

Therefore, the correct answer is D) $10,514

For Year 2016,Precision Masters Had Sales of $42,900,cost of Goods