**Economic Analysis for Bicycle Repair Shop**The owner of a bicycle repair shop forecasts the following financial details:- **Revenues:** $160,000 per year- **Variable Costs:** $50,000- **Rental Costs:** $30,000- **Depreciation on Repair Tools:** $10,000- **Tax Rate:** 20%### Task A: Income Statement Preparation1. **Income Statement Components**: - **Revenue** - **Rental Costs** - **Depreciation** - **Pretax Profit** - **Taxes**The diagram provides an outline to prepare an income statement based on these projected figures.### Task B: Operating Cash Flow CalculationCalculate the operating cash flow using the three methods listed below:1. **Dollars In Minus Dollars Out**2. **Adjusted Accounting Profits**3. **Add Back Depreciation Tax Shield**### Methods of Calculation| **Method** | **Operating Cash Flow** ||-------------------------------------------------|--------------------------|| i. Dollars in minus dollars out | || ii. Adjusted Accounting Profits | || iii. Add back depreciation tax shield | |The table is structured to fill in the calculated operating cash flow for each method.

Income Statement :— It is one of the financial statement that shows profitability, total revenue and…

The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Varlable 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. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. INCOME STATEMENT Depreciation Pretax profit Rental costs Revenue Taxes b. Calculate the operating cash flow for the repair shop using the three methods given below: 1. Dollars in minus dollars out. II. Adjusted accounting profits. III. Add back depreciation tax shield. Methods of Calculation i. Dollars in minus dollars out ii. Adjusted Accounting profits ii. Add back depreciation tax shield Operating Cash flow

The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Varlable 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. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. INCOME STATEMENT Depreciation Pretax profit Rental costs Revenue Taxes b. Calculate the operating cash flow for the repair shop using the three methods given below: 1. Dollars in minus dollars out. II. Adjusted accounting profits. III. Add back depreciation tax shield. Methods of Calculation i. Dollars in minus dollars out ii. Adjusted Accounting profits ii. Add back depreciation tax shield Operating Cash flow

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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