How does Depreciation Expense impact Avett Inc.'s 2020 Statement of Cash Flows? Question 6 options: Depreciation Expense is included as a negative adjustment in Cash Flows from Investing Depreciation Expense is not included on the Statement of Cash Flows Depreciation Expense is included as a positive adjustment in Cash Flows from Operations Depreciation Expense is included as a positive adjustment in Cash Flows from Financing Depreciation Expense is included as a positive adjustment in Cash Flows from Investing Depreciation Expense is included as a negative adjustment in Cash Flows from Financing Depreciation Expense is included as a negative adjustment in Cash Flows from Operations CONSOLIDATED BALANCE SHEET(in millions)Year EndingDec. 3120202019ASSETSCash and Cash Equivalents$1,000$800Accounts Receivable300500Merchandise Inventory880650Short Term Investments145120TOTAL CURRENT ASSETS2,3252,070PP&E, net accumulated depreciation of$600 in 2020 and $500 in 20191,2501,000TOTAL ASSETS$3,575$3,070LIABILITIESAccounts PayableOther Payables$530$500410362TOTAL CURRENT LIABILITIES940862Mortgage PayableLong-Term Bank Loan700900850TOTAL LIABILITIES1,8402,412OWNERS EQUITYCommon Stock8070Preferred StockAdditional Paid in CapitalRetained EarningsTOTAL OWNERS EQUITY2902501,3651,735338658TOTAL LIABILITIES + OWNERS EQUITY$3,575$3,070 CONSOLIDATED INCOME STATEMENT(in millions)December 31, 2020$20,000(10,000)(10,000)(8,000)2,000(500)$1,500RevenuesCost of Goods SoldProfit MarginSG&APre-Tax IncomeТах ExpenseNet IncomeAdditional Information> No Property, Plant & Equipment (PPE) was sold during 2020.> No short-term investments were sold during the year.> All depreciation expense is included in SG&A> Because there is no dividends payable account at either the start of end of the year, you mayassume all dividends declared in 2020 were paid in 2020.Тo Do> Complete the 2020 Cash Flow Statement on the following page.Note: You may use the worksheet provided on the last page to help you prepare the Cash Flow Statement.Hint #1 PPE: Remember to evaluate changes in gross PPE separate from changes in accumulateddepreciation. Recall gross PPE less accumulated depreciation equals net PPE.Hint #2 Stock Issuance: Remember the total change in cash due to stock issuances/repurchases is the sumof the change in common stock (stated par value) and additional paid in capital (APIC).

The cash flow statement is helpful for the stakeholders that they can identify the organization's…

Answered: How does Depreciation Expense impact…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

How does Depreciation Expense impact Avett Inc.'s 2020 Statement of Cash Flows?

Question 6 options:

	Depreciation Expense is included as a negative adjustment in Cash Flows from Investing
	Depreciation Expense is not included on the Statement of Cash Flows
	Depreciation Expense is included as a positive adjustment in Cash Flows from Operations
	Depreciation Expense is included as a positive adjustment in Cash Flows from Financing
	Depreciation Expense is included as a positive adjustment in Cash Flows from Investing
	Depreciation Expense is included as a negative adjustment in Cash Flows from Financing
	Depreciation Expense is included as a negative adjustment in Cash Flows from Operations

CONSOLIDATED BALANCE SHEET
(in millions)
Year Ending
Dec. 31
2020
2019
ASSETS
Cash and Cash Equivalents
$1,000
$800
Accounts Receivable
300
500
Merchandise Inventory
880
650
Short Term Investments
145
120
TOTAL CURRENT ASSETS
2,325
2,070
PP&E, net accumulated depreciation of
$600 in 2020 and $500 in 2019
1,250
1,000
TOTAL ASSETS
$3,575
$3,070
LIABILITIES
Accounts Payable
Other Payables
$530
$500
410
362
TOTAL CURRENT LIABILITIES
940
862
Mortgage Payable
Long-Term Bank Loan
700
900
850
TOTAL LIABILITIES
1,840
2,412
OWNERS EQUITY
Common Stock
80
70
Preferred Stock
Additional Paid in Capital
Retained Earnings
TOTAL OWNERS EQUITY
290
250
1,365
1,735
338
658
TOTAL LIABILITIES + OWNERS EQUITY
$3,575
$3,070

CONSOLIDATED INCOME STATEMENT
(in millions)
December 31, 2020
$20,000
(10,000)
(10,000)
(8,000)
2,000
(500)
$1,500
Revenues
Cost of Goods Sold
Profit Margin
SG&A
Pre-Tax Income
Тах Expense
Net Income
Additional Information
> No Property, Plant & Equipment (PPE) was sold during 2020.
> No short-term investments were sold during the year.
> All depreciation expense is included in SG&A
> Because there is no dividends payable account at either the start of end of the year, you may
assume all dividends declared in 2020 were paid in 2020.
Тo Do
> Complete the 2020 Cash Flow Statement on the following page.
Note: You may use the worksheet provided on the last page to help you prepare the Cash Flow Statement.
Hint #1 PPE: Remember to evaluate changes in gross PPE separate from changes in accumulated
depreciation. Recall gross PPE less accumulated depreciation equals net PPE.
Hint #2 Stock Issuance: Remember the total change in cash due to stock issuances/repurchases is the sum
of the change in common stock (stated par value) and additional paid in capital (APIC).

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