Ruston Company had Net Income for 2020 of $6,200,000. The firm invested $4,000,000 in manufacturing equipment during 2020. The equipment is being depreciated over five years using straight-line depreciation, starting in 2020. Assuming no other adjustments to cash flow than those mentioned here, create a statement of cash flows for 2020 with amounts in thousands. What is the Net Cash Flow in 2020

$3,000,000

Explanation:

Calculation to determine the Net Cash Flow in 2020

STATEMENT OF CASH FLOW

For the Year 2020

Cash flow from operating Activities:

Net Income $6,200,000

Add Depreciation Expense $ 800,000

Net Cash provided by operating activities $7,000,000

($6,200,000+$800,000)

Cash flow from Investing activities:

Investment in Equipment($4,000,000)

Net Cash used in Investing activities ($4,000,000)

Net Cash flow in 2020 $3,000,000

Depreciation under Straight Line method=(Cost - Salvage Value)/Useful Life

Depreciation under Straight Line method=(4000000-0)/5

Depreciation under Straight Line method= 800,000

Therefore the Net Cash Flow in 2020 is $3,000,000

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