To construct: income statement and determine net income and expected net cash flows.

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Answer 1

Question

Chapter 2, Problem 14P

a)

Summary Introduction

To construct: income statement and determine net income and expected net cash flows.

b)

Summary Introduction

To determine: Net income and net cash flow when depreciation expense is doubled.

c)

Summary Introduction

To determine: Net income and net cash flow when depreciation was reduced by 50%.

d)

Summary Introduction

To discuss: Person X opinions on these two situations.

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Alpha Resources has sales revenue of $800,000, operating costs of $400,000, and depreciation expense of $20,000. The company has $300,000 of outstanding bonds that pay 5% interest and it faces an average state-plus-federal tax rate of 40%. What is its net income?

The Berndt Corporation expects to have sales of $12 million. Costs other thandepreciation are expected to be 75% of sales, and depreciation is expected tobe $1.5 million. All sales revenues will be collected in cash, and costs otherthan depreciation must be paid for during the year. Berndt’s federal-plusstate tax rate is 40%. Berndt has no debt.a. Set up an income statement. What is Berndt’s expected net income? Itsexpected net cash flow?

Menendez Corporation expects to sell $ 12 million. Costs, excluding depreciationtion, will represent 75% of sales and a depreciation of $ 1.5 million is expected.Sales will be collected in cash and all costs less depreciation will bebe settled during the year. The federal and state tax rate is 40%.to. Prepare an income statement. What will the company's expected net cash flow be?b. Suppose that Congress modified the tax laws and that doubled thecompany pricing. There were no changes in operations. How would it affectThat in recorded earnings and net cash flow?c. Now suppose that Congress did not double depreciation but reduced it byfifty%. How will that affect net cash flow?d. If it were your company, would you prefer Congress to double depreciation spendingtion or cut it in half? Explain your answer.

Answer 2

Question

Chapter 2, Problem 14P

a)

Summary Introduction

To construct: income statement and determine net income and expected net cash flows.

b)

Summary Introduction

To determine: Net income and net cash flow when depreciation expense is doubled.

c)

Summary Introduction

To determine: Net income and net cash flow when depreciation was reduced by 50%.

d)

Summary Introduction

To discuss: Person X opinions on these two situations.

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Answer 3

Question

Chapter 2, Problem 14P

a)

Summary Introduction

To construct: income statement and determine net income and expected net cash flows.

b)

Summary Introduction

To determine: Net income and net cash flow when depreciation expense is doubled.

c)

Summary Introduction

To determine: Net income and net cash flow when depreciation was reduced by 50%.

d)

Summary Introduction

To discuss: Person X opinions on these two situations.

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Answer 4

Question

Chapter 2, Problem 14P

a)

Summary Introduction

To construct: income statement and determine net income and expected net cash flows.

b)

Summary Introduction

To determine: Net income and net cash flow when depreciation expense is doubled.

c)

Summary Introduction

To determine: Net income and net cash flow when depreciation was reduced by 50%.

d)

Summary Introduction

To discuss: Person X opinions on these two situations.

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Answer 5

Chapter 2, Problem 14P

a)

Summary Introduction

To construct: income statement and determine net income and expected net cash flows.

b)

Summary Introduction

To determine: Net income and net cash flow when depreciation expense is doubled.

c)

Summary Introduction

To determine: Net income and net cash flow when depreciation was reduced by 50%.

d)

Summary Introduction

To discuss: Person X opinions on these two situations.

Answer 6

Chapter 2, Problem 14P

a)

Summary Introduction

To construct: income statement and determine net income and expected net cash flows.

Answer 7

Chapter 2, Problem 14P

a)

Summary Introduction

To construct: income statement and determine net income and expected net cash flows.

Answer 8

b)

Summary Introduction

To determine: Net income and net cash flow when depreciation expense is doubled.

Answer 9

b)

Summary Introduction

To determine: Net income and net cash flow when depreciation expense is doubled.

Answer 10

c)

Summary Introduction

To determine: Net income and net cash flow when depreciation was reduced by 50%.

Answer 11

c)

Summary Introduction

To determine: Net income and net cash flow when depreciation was reduced by 50%.

Answer 12

d)

Summary Introduction

To discuss: Person X opinions on these two situations.

Answer 13

d)

Summary Introduction

To discuss: Person X opinions on these two situations.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 2 - Prob. 1Q Ch. 2 - Prob. 2Q Ch. 2 - Prob. 3Q Ch. 2 - Prob. 4Q Ch. 2 - Prob. 5Q Ch. 2 - Prob. 6Q Ch. 2 - Prob. 7Q Ch. 2 - Prob. 8Q Ch. 2 - Prob. 1P Ch. 2 - Prob. 2P

To construct: income statement and determine net income and expected net cash flows.

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To construct: income statement and determine net income and expected net cash flows.

To determine: Net income and net cash flow when depreciation expense is doubled.

To determine: Net income and net cash flow when depreciation was reduced by 50%.

To discuss: Person X opinions on these two situations.

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Chapter 2 Solutions