Prescott Football Manufacturing had the following operating results for 2019: sales = $30,774; cost of goods sold = $21,956; depreciation expense = $3,596; interest expense = $604; dividends paid = $897. At the beginning of the year, net fixed assets were $20,394, current assets were $1,973, and current liabilities were $5,108. At the end of the year, net fixed assets were $23,257, current assets were $4,579, and current liabilities were $3,269. The tax rate for 2019 was 23 percent. What is the operating cash flow for 2019?

a. 7756
b. 3596
c. 4122
d. 7540
e. 8830

The correct answer is option (A).

Explanation:

According to the scenario, the computation for the given data are as follows:

Operating cash flow = Sales - Cost of Goods Sold - Tax

Where, Tax = Sales - Cost of Goods Sold - Depreciation - Interest Expense × Rate of Tax

So, Tax = $30,774 - $21,956 - $3,596 - $604 × 23% = $1,062.14

By putting the value in the formula, we get

Operating Cash Flow = $30,774 - $21,956 - $1062.14

= $7,755.86

or = $7,756

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