Answer A is already completed. Please only solve problem set B!
B.
Calculate the operating cash flow for the repair shop using the three methods given below:
i. Dollars in minus dollars out.
Operating Cash flow =
ii. Adjusted accounting profits.
Operating Cash flow =
iii. Add back depreciation tax shield.
Operating Cash flow =
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24 The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation on the repair tools will be $10,000. 0.13 points a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%.
Answer is complete and correct.
INCOME STATEMENT
Revenue Rental costs
160,000
30,000
Variable costs
50,000
Depreciation
10,000
Pretax profit
70,000
Taxes
14,000
Net income
56,000