Lecture_XV_HW_Solutions

Lecture_XV_HW_Solutions - Lecture XV-HW Solutions 8-43...

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Lecture XV-HW Solutions 8-43 (30-45 min.) 1. See Exhibit 8-43 on the following page. Chapter 8 Long-Lived Assets and Depreciation 115
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EXHIBIT 8-43 1. FLECK COMPANY Income Statement For the Year Ended December 31, 20X2 (In Thousands of Dollars) Before Taxes After Taxes Straight–line DDB Straight–line DDB Depreciation Depreciation Depreciation Depreciation Income Statement Cash sales $180 $180 $180.0 $180 Operating expenses 100 100 100.0 100 Depreciation expense* 9 20 9 .0 20 Pretax income 71 60 71.0 60 Income taxes 28 .4 24 Net income $ 71 $ 60 $ 42 .6 $ 36 Statement of Cash Flows Cash $180 $180 $180.0 $180 Cash operating expenses 100 100 100 100 Cash tax payments 28 .4 24 Net cash provided by operations $ 80 $ 80 $ 51 .6 $ 56 * SL = 1/5 ($50,000 - $5,000) = $9,000; DDB = 2 x (1/5) x $50,000 = $20,000 Chapter 8 Long-Lived Assets and Depreciation 116
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8-43 (continued) 2. By itself, depreciation expense does not provide cash. This point is illustrated by the part of requirement 1 that compares the amounts shown before taxes . Note that the cash provided by operations is exactly the same under straight-line and DDB depreciation methods. No matter
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Lecture_XV_HW_Solutions - Lecture XV-HW Solutions 8-43...

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