Income Statements and Balance Sheet Balance Sheet 2012 2013 2014 Cash $9,000 $7,
ID: 1259096 • Letter: I
Question
Income Statements and Balance Sheet Balance Sheet
2012
2013
2014
Cash
$9,000
$7,282
$14,000
Short-term investments
48,600
20,000
71,632
Accounts receivable
351,200
632,160
878,000
Inventories
715,200
1,287,360
1,716,480
Total current assets
$1,124,000
$1,946,802
$2,680,112
Gross fixed assets
491,000
1,202,950
1,220,000
Less: Accumulated depreciation
146,200
263,160
383,160
Net fixed assets
$344,800
$939,790
$836,840
Total assets
$1,468,800
$2,886,592
$3,516,952
Liabilities and Equity
Accounts payable
$145,600
$324,000
$359,800
Notes payable
200,000
720,000
300,000
Accruals
136,000
284,960
380,000
Total current liabilities
$481,600
$1,328,960
$1,039,800
Long-term debt
323,432
1,000,000
500,000
Common stock (100,000 shares)
460,000
460,000
1,680,936
Retained earnings
203,768
97,632
296,216
Total equity
$663,768
$557,632
$1,977,152
Total liabilities and equity
$1,468,800
$2,886,592
$3,516,952
2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?
Income Statements and Balance Sheet Balance Sheet
2012
2013
2014
Cash
$9,000
$7,282
$14,000
Short-term investments
48,600
20,000
71,632
Accounts receivable
351,200
632,160
878,000
Inventories
715,200
1,287,360
1,716,480
Total current assets
$1,124,000
$1,946,802
$2,680,112
Gross fixed assets
491,000
1,202,950
1,220,000
Less: Accumulated depreciation
146,200
263,160
383,160
Net fixed assets
$344,800
$939,790
$836,840
Total assets
$1,468,800
$2,886,592
$3,516,952
Liabilities and Equity
Accounts payable
$145,600
$324,000
$359,800
Notes payable
200,000
720,000
300,000
Accruals
136,000
284,960
380,000
Total current liabilities
$481,600
$1,328,960
$1,039,800
Long-term debt
323,432
1,000,000
500,000
Common stock (100,000 shares)
460,000
460,000
1,680,936
Retained earnings
203,768
97,632
296,216
Total equity
$663,768
$557,632
$1,977,152
Total liabilities and equity
$1,468,800
$2,886,592
$3,516,952
Explanation / Answer
2. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow?
Ans: Depreciation and amortization are not cash charges, so neither of them has an effect on a firm’s reported profits.
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