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How does Depreciation Expense impact Declan's Designs' 2022 Statement of Cash Flows? Question 16 options: Depreciation Expense is included as a positive adjustment in Cash Flows from Operations Depreciation Expense is included as a negative adjustment in Cash Flows from Financing Depreciation Expense is included as a positive adjustment in Cash Flows from Financing Depreciation Expense is included as a negative adjustment in Cash Flows from Investing Depreciation Expense is included as a negative adjustment in Cash Flows from Operations Depreciation Expense is included as a positive adjustment in Cash Flows from Investing Depreciation Expense is not included on the Statement of Cash Flows

How does Depreciation Expense impact Declan's Designs' 2022 Statement of Cash Flows? Question 16 options: Depreciation Expense is included as a positive adjustment in Cash Flows from Operations Depreciation Expense is included as a negative adjustment in Cash Flows from Financing Depreciation Expense is included as a positive adjustment in Cash Flows from Financing Depreciation Expense is included as a negative adjustment in Cash Flows from Investing Depreciation Expense is included as a negative adjustment in Cash Flows from Operations Depreciation Expense is included as a positive adjustment in Cash Flows from Investing Depreciation Expense is not included on the Statement of Cash Flows

FINANCIAL ACCOUNTING
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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How does Depreciation Expense impact Declan's Designs' 2022 Statement of Cash Flows?

 

Question 16 options:

 

Depreciation Expense is included as a positive adjustment in Cash Flows from Operations
 

Depreciation Expense is included as a negative adjustment in Cash Flows from Financing
 

Depreciation Expense is included as a positive adjustment in Cash Flows from Financing
 

Depreciation Expense is included as a negative adjustment in Cash Flows from Investing
 

Depreciation Expense is included as a negative adjustment in Cash Flows from Operations
 

Depreciation Expense is included as a positive adjustment in Cash Flows from Investing
 

Depreciation Expense is not included on the Statement of Cash Flows
ASSETS 12/31/2021 12/31/2022 For the Year Ending Current Assets 12/31/2022 Cash and Cash Equivalents Accounts Receivable, Net Merchandise Inventory Total Current Assets $90,000 97,000 400,000 587,000 $294,000 101,000 475,000 870,000 Sales Revenue CGS Gross Margin SG&A $225,000 (16,000) 209,000 (22,000) 187.000 62,000 600,000 $1,249,000 70,000 600,000 $1,540,000 Operating Income Interest Expense Loss on Sale of PPE Pre-Tax Income Income Tax Expense Net Income PPE, Net Goodwill, Net (12,000) (5,000) 170,000 (7,000) $163,000 Total Assets LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable Interest Payable Dividends Payable Total Current Liabilities 26,000 3,000 20,000 49,000 17,000 5,000 10,000 32,000 Additional Information regarding Declan's Designs' 12/31/22 financials: Mortgage Payable Long-Term Bank Loan Total Liabilities PROPERTY, PLANT & EQUIPMENT PPE is shown net accumulated depreciation. Accumulated depreciation was $18,000 at the beginning of the year and $20,000 at the end of the year. Depreciation expense for the year was $3,000, which is included in SG&A. New PPE was bought during the year for $22,000 (in cash). 500,000 500,000 200,000 732,000 549,000 Shareholder's Equity Preferred Stock Common Stock Additional Paid in Capital Retained Earnings Total Shareholder's Equity Note: You may use the worksheet provided on the last page to help you prepare the Cash Flow Statement. Hint #1: The most recent year is not always in the left column. 8,000 54,000 638,000 700,000 10,000 60,000 738,000 808,000 Hint #2: Evaluate changes in gross PPE separate from changes in accumulated depreciation. Recall gross PPE less accumulated depreciation equals net PPE. Hint #3: Never "plug" the annual change in gross PPE. Separately evaluate the increase in gross PPE (capital expenditures) from the annual decrease in gross PPE (sale of PPE). Total Liabilities &Shareholders' Equity $1,249,000 $1,540,000 Hint #4: 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). Hint #5: Dividends declared (the decrease in RE) is not the same as dividends paid (the decrease in dividends payable). To find dividends paid, set up your dividends payable account with the beginning and ending balances from the balance sheet. Increase dividends paid by the amount of dividends declared. Then plug for the decrease in dividends payable (which represents dividends paid).
Transcribed Image Text:ASSETS 12/31/2021 12/31/2022 For the Year Ending Current Assets 12/31/2022 Cash and Cash Equivalents Accounts Receivable, Net Merchandise Inventory Total Current Assets $90,000 97,000 400,000 587,000 $294,000 101,000 475,000 870,000 Sales Revenue CGS Gross Margin SG&A $225,000 (16,000) 209,000 (22,000) 187.000 62,000 600,000 $1,249,000 70,000 600,000 $1,540,000 Operating Income Interest Expense Loss on Sale of PPE Pre-Tax Income Income Tax Expense Net Income PPE, Net Goodwill, Net (12,000) (5,000) 170,000 (7,000) $163,000 Total Assets LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable Interest Payable Dividends Payable Total Current Liabilities 26,000 3,000 20,000 49,000 17,000 5,000 10,000 32,000 Additional Information regarding Declan's Designs' 12/31/22 financials: Mortgage Payable Long-Term Bank Loan Total Liabilities PROPERTY, PLANT & EQUIPMENT PPE is shown net accumulated depreciation. Accumulated depreciation was $18,000 at the beginning of the year and $20,000 at the end of the year. Depreciation expense for the year was $3,000, which is included in SG&A. New PPE was bought during the year for $22,000 (in cash). 500,000 500,000 200,000 732,000 549,000 Shareholder's Equity Preferred Stock Common Stock Additional Paid in Capital Retained Earnings Total Shareholder's Equity Note: You may use the worksheet provided on the last page to help you prepare the Cash Flow Statement. Hint #1: The most recent year is not always in the left column. 8,000 54,000 638,000 700,000 10,000 60,000 738,000 808,000 Hint #2: Evaluate changes in gross PPE separate from changes in accumulated depreciation. Recall gross PPE less accumulated depreciation equals net PPE. Hint #3: Never "plug" the annual change in gross PPE. Separately evaluate the increase in gross PPE (capital expenditures) from the annual decrease in gross PPE (sale of PPE). Total Liabilities &Shareholders' Equity $1,249,000 $1,540,000 Hint #4: 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). Hint #5: Dividends declared (the decrease in RE) is not the same as dividends paid (the decrease in dividends payable). To find dividends paid, set up your dividends payable account with the beginning and ending balances from the balance sheet. Increase dividends paid by the amount of dividends declared. Then plug for the decrease in dividends payable (which represents dividends paid).
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