Depreciation and accounting cash flow A firm in the third year of depreciating its only asset, which originally cost $171,000 and has a 5-year MACRS recovery period has gathered the following data relative to Accruals Current assets $15,600 124,000 14,300 Interest expense Sales revenue Inventory Total costs before depreciation, interest and taxes Tax rate on ordinary income 412,000 70,100 295,000 40% a. Use the relevant data to determine the operating cash flow for the current year. b. Explain the impact that depreciation, as well as any other noncash charges, has on a firm's cash flows. a. Complete the following table to determine the operating cash flow (OCF): (Round to the nearest dollar.) Operating Cash Flow Sales revenue Less: Total costs before depreciation, interest, and taxes Depreciation expense Earnings before interest and taxes Less: Taxes at 40% Net operating profit after taxes (NOPAT) Plus: Depreciation Operating Cash Flow (OCF) $ $ $ $ C
Depreciation and accounting cash flow A firm in the third year of depreciating its only asset, which originally cost $171,000 and has a 5-year MACRS recovery period has gathered the following data relative to Accruals Current assets $15,600 124,000 14,300 Interest expense Sales revenue Inventory Total costs before depreciation, interest and taxes Tax rate on ordinary income 412,000 70,100 295,000 40% a. Use the relevant data to determine the operating cash flow for the current year. b. Explain the impact that depreciation, as well as any other noncash charges, has on a firm's cash flows. a. Complete the following table to determine the operating cash flow (OCF): (Round to the nearest dollar.) Operating Cash Flow Sales revenue Less: Total costs before depreciation, interest, and taxes Depreciation expense Earnings before interest and taxes Less: Taxes at 40% Net operating profit after taxes (NOPAT) Plus: Depreciation Operating Cash Flow (OCF) $ $ $ $ C
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 81.2C
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