Question

Please adhere closely to the rounding instructions(in red). Thanks!

Question 1 1.5 pts The 2013 balance sheet of Maria's Tennis Shop, Inc., showed long-term debt of $1.8 million, and the 2014 balance sheet showed long-term debt of $3.6 million. The 2014 income statement showed an interest expense of $694,000 What was the firm's cash flow to creditors during 2014? (Round final answer to the nearest whole dollar. Do not round intermediate calculations) Topic: Cash Flow Identity

Answer 1

Cash Flow to creditors = Interest Expense - Net New Borrowings

= Interest Expense in 2014 - (Long term Debt in 2014 - Long term debt in 2013)

= $694,000 - ($3,600,000 - $1,800,000)

= - $1,106,000

Thus cash flow to creditors is - $1,106,000.