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Now, what would be the impact on net income, total profit margin, and cash flow?Net income = $1.35 million / Profit Margin = 11.3% / Cash Flow= $2.1 million3.7 Consider Southeast Home Care, a for-profit business. In 2015, its net income was $1,500,000 and itdistributed $500,000 to owners in the form of dividends. Its beginning-of-year equity balance was
$12,000,000. Use this information to construct the business’s statement of changes in equity. What is the ending 2015 value of the business’s equity account? Net Income $1500Less: Dividends Paid500Increase in equity$1000Equity (net assets), beginning of year$12,000Equity, end of year$13,0003.8 Bright Horizons Skilled Nursing Facility, an investor-owned company, constructed a new building to replace its outdated facility. The new building was completed on January 1, 2015, and Bright Horizons began recording depreciation immediately. The total cost of the new facility was $18,000,000, comprising (a) $10 million in construction costs and (b) $8 million for the land. Bright Horizons estimated that the new facility would have a useful life of 20 years. The salvage value of the building at the end of its useful life was estimated to be $1,500,000.a. Using the straight-line method of depreciation, calculate annual depreciation expense on the new facility. $825,000/yearb. Assuming a 40 percent income tax rate, how much did Bright Horizons save in income taxes for the year ended December 31, 2015, as a result of the depreciation recorded on the new facility? (i.e. what was the depreciation shield?) $330,000c. Does the depreciation shield result in cash or noncash savings for Bright Horizons? Explain.The depreciation will represent cash savings because while depreciation is listed as an expense on the income statement, it is not actually paid out—it is money (cash on hand) that the organization is saving for building replacement cost in the future, but they do not have to pay taxes on that part of their income since it is a GAAP approved expense on the income statement.3.9 Integrated Physicians & Associates, an investor-owned company, had the following general ledger account balances at the end of 2015:Gross patient service revenue (total charges)$975,000Contractual discounts and allowances to third-party payers250,000Charges for charity (indigent) care100,000Estimated provision for bad debts50,000a.Construct the revenue section of Integrated Physicians & Associates income statement for the year ended December 31, 2015.Patient Service Revenue:$625Less: Provision for Bad Debts:50Net Revenue:$575b.Suppose the 2015 contractual discounts and allowances balance reported above is understated by $50,000. In other words, the correct balance should be $300,000.
Assuming a 40% income tax rate, what would be the effect of the misstatement on Integrated Physicians & Associates’ 2015 reported:Net Patient Service Revenue: Net revenue would be $50,000 less.Total Expenses, including income tax expense: Income tax expense will be too high but other expenses will be unaffected.Net Income: Net income will be too high by $70,000 due to over-calculated tax expense
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Revenue, Net Income, Generally Accepted Accounting Principles