How does Depreciation Expense impact Declan's Designs' 2022 Statement of Cash Flows?
How does Depreciation Expense impact Declan's Designs' 2022 Statement of Cash Flows?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
How does
Transcribed Image Text:Declan's Designs Balance Sheet
Declan's Designs Income Statement
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
$225,000
(16,000)
209,000
(22,000)
187,000
(12,000)
(5,000)
170,000
(7,000)
$163,000
CGS
Gross Margin
SG&A
PPE, Net
Goodwill, Net
62,000
600,000
$1,249,000
70,000
600,000
$1,540,000
Operating Income
Interest Expense
Total Assets
Loss on Sale of PPE
Pre-Tax Income
Income Tax Expense
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable
Interest Payable
Dividends Payable
Net Income
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:
Total Current Liabilities
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
Note: You may use the worksheet provided on the last page to help you prepare the Cash Flow Statement.
Preferred Stock
Common Stock
Hint #1: The most recent year is not always in the left column.
Additional Paid in Capital
Retained Earnings
Total Shareholder’s Equity
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).
Expert Solution
Step 1 Introduction
The cash flow statement is prepared to record the cash flow from various activities during the period. The entire cash flow of the firm is divided into three categories; 1) Cash flow from operating activities, 2) Cash flow from investing activities, and 3) Cash flow from financing activities.
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