17 Adjustments to net Income - indirect methodDATADepreciationAmortization of patentsGain from sale of investmentsNet income$14,785$4,500$20,820$279,400Using formulas and cell references, perform the required analysis, and inputyour answer into the Amount column. Transfer the numeric result for thegreen entry cell (B12) into the appropriate field in CNOWV2 for grading.AmountFormulaNetash flow from operating activities Adjustments to net income-indirect methodLighthouse Corporation's accumulated depreciation-equipment account increased by $14,785 while $4,500 of patent amortization was recognized between balance sheetdates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $20,820 from the sale ofinvestments. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questionbelow.Open spreadsheetReconcile a net income of $279,400 to net cash flow from operating activities. Round your answer to the nearest dollar.2$

Cash Flow from Operating Activities: Under Indirect method of Calculating the cash flow from…

Answered: Adjustments to net Income - indirect…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter15: Statement Of Cash Flows

Section: Chapter Questions

Problem 2BE

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Adjustment for depreciation The estimated amount of depredation on equipment for the current year is $133,000. a. How is the adjustment recorded? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease. b. If the adjustment in (a) was omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of December 31?
Revising depreciation estimates Hard Bodies Co. is a fitness chain that has just completed its second year of operations. At the beginning of its first fiscal year, the company purchased fitness equipment at a cost of 600,000 and estimated that the equipment would have a useful life of five years and no residual value. The company uses the straight-line depreciation method. The company reported net income for the first two years of operations as follows: Mike Gambit, the companys chief financial officer (CFO), has recently run financial models to predict future net income, and he expects net losses to continue at (2,000) per year for the next three years. James Steed, the president of Hard Bodies, is concerned about these predictions, as he is under pressure from the companys owner to return the company to Year 1 net income levels. If the company does not meet these goals, both he and Mike will likely be fired. Mike suggests that the company change the estimated useful life of the fitness equipment to 10 years and increase the equipments estimated residual value to 50,000. This will reduce depreciation expense and increase net income. 1. Evaluate the decision to change the equipments estimated useful life and estimated residual value to improve earnings. How does this change impact the usefulness of the companys net income for external decision makers? 2. If Mike and James make the change, are they acting in an ethical manner? Explain.
Albany Corporation purchased equipment at the beginning of Year 1 for 75,000. The asset does not have a residual value and is estimated to be in service for 8 years. Calculate the depreciation expense for Years 1 and 2 using the double-declining-balance method. Round to the nearest dollar.

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