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Serggg [28]
3 years ago
8

The owner of a bicycle repair shop forecasts revenues of $212,000 a year. Variable costs will be $63,000, and rental costs for t

he shop are $43,000 a year. Depreciation on the repair tools will be $23,000. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. b. Calculate the operating cash flow for the repair shop using the three methods given below: Now calculate the operating cash flow. Dollars in minus dollars out. Adjusted accounting profits. Add back depreciation tax shield.
Business
1 answer:
Nataly [62]3 years ago
7 0

Answer:

Sales Revenue            212,000

Variable Cost               (63,000)

Rent Expense               (43,000)

Depreciation Expense (23,000)

Income before taxes     83,000

Income tax expense <u>    (16,600)   </u>

Net Income                    84,800

Cash from operating activities 107,800

tax-shield from depreciation 4,600

Explanation:

Cash flow from operations (indirect method)

net income 84,800 + depreciation expense = 107,800

The depreciation provides a tax shield as they are an accounting concept. The depreciation expense did not involve the outflow of cash but, it is a taxable deduction therefore generates a tax-shield.

23,000 x 20% = 4,600

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3 years ago
Automatic stabilizers refer to:
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Answer:

B) government spending and taxes that automatically increase or decrease along with the business cycle.

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3 years ago
A competitive firm produces output using three fixed factors and one variable factor. The firm's short run production function i
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Answer:

D) 75

Explanation:

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q = 305X - 2X²        

we calculate the derivative of q:

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6 0
2 years ago
To assign overhead costs to each product, the company:_____.
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Answer:

a. multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.

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Generally, an activity-based costing uses multiple cost pools such as manufacturing cost or customer services and multiple cost drivers such as direct labor hours worked, number of changes used in engineering department, etc.

Cost pool is simply the amount of money spent by a firm on a particular activity.

Hence, to assign overhead costs to each product, the company multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.

In activity-based costing, the activity rate for an activity cost pool is calculated by using the following formula;

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C

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3 years ago
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