28 November, 15:11

# During 2014, Raines Umbrella Corp. had sales of \$980,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were \$675,000, \$85,000, and \$190,000, respectively. In addition, the company had an interest expense of \$51,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) What is the Operating cash flow?

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1. 28 November, 18:54
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The operating cash flow for the company is \$160,000

Explanation:

First we need to find the net income for the company. Sales were 980,000 and we will subtract costs from this to find the net income.

Net income = Sale - (Costs of good sold+administrative expenses + depreciation expenses)

Net income = 980,000 - (675,000+85,000+190,000) = 30,000

Now we need to find how much tax the company paid

Tax = tax rate * net income

Tax = 0.30*30,000=9,000

Now in order to find the operating cash flow we will start from net income, add depreciation expense to it because depreciation expense is a non cash expense and then subtract interest expense and tax expense from it.

Operating Cash flow = Net income+depreciation expense-interest expense-tax expense.

Operating cash flow = 30,000+190,000-51,000-9,000 = 160,000