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9 June, 13:09

The 2008 balance sheet of Maria's Tennis Shop, Inc., showed long-term debt of $2.25 million, and the 2009 balance sheet showed long-term debt of $4 million. The 2009 income statement showed an interest expense of $330,000. What was the firm's cash flow to creditors during 2009?

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  1. 9 June, 15:43
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    net cash flow from creditors of $1.42 million

    Explanation:

    The movement in the long term debt account between 2008 and 2009 is as a result of the interest owed on the debt and the cash payment for the period.

    Let the cash outflow to the creditor be H

    $2.25 million + 0.33 million - H = $4 million

    H = $2.25 million + 0.33 million - $4 million

    H = ($1.42 million)

    This means that the firm had a net cash flow from creditors of $1.42 million in 2019.
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