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15 September, 02:56

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $2.6 million, and the 2018 balance sheet showed long-term debt of $3.75 million. The 2018 income statement showed an interest expense of $370,000. What was the firm's cash flow to creditors during 2018?

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  1. 15 September, 05:16
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    cash flow = - $780000

    Explanation:

    given data

    2017 debt = $2.6 million

    2018 debt = $3.75 million

    interest expense = $370,000

    to find out

    What was the firm's cash flow to creditors

    solution

    first we get net new debt that is express as

    Net new deb = 2018 debt - 2017 debt ... 1

    Net new debt = $3.75 million - $2.6 million

    Net new debt = $1.15 million

    so

    cash flow to creditors will be here as

    cash flow = Interest expense - Net new debt ... 2

    cash flow = $370,000 - $1.15 million

    cash flow = - $780000
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