Intensive Care Urology Practice (ICUP), a not-for-profit business, had revenues in 2019 of $900,000. Cash Expenses...

Intensive Care Urology Practice (ICUP), a not-for-profit business, had revenues in 2019 of $900,000. Cash Expenses are $600,000, plus depreciation of $100,000. All revenues were collected in cash, and all expenses, excluding depreciation, were paid in cash during the year. No other assets were purchased, and no money was borrowed.

a. Construct ICUP’s Income Statement.

Net Income $

b. What was ICUP’s Cash Flow for the year?

Cash Flow $

c. If PU changed its depreciation method so that the Depreciation Expense tripled to $300,000, what would be the new Net Income (other expenses remained the same)?

Net Income $

d. Again, if (under GAAP) ICUP changed its depreciation method so that the Depreciation Expense tripled to $300,000, what would be the new Cash Flow?

Cash Flow $

e. Comment on the results.

Expert Solution

a. Net income : $ 900,000 - $ 600,000 - $ 100,000 = $ 200,000

b. Cash Flow : $ 900,000 - $ 600,000 = $ 300,000

c. Net income : $ 900,000 - $ 600,000 - $ 300,000 = $ 0

d. Cash Flow: $ 900,000 - $ 600,000 = $ 300,000

e. Change in depreciation method does not affect cash flow, as depreciation is a noncash expense.

jeff jeffy answered 2 years ago

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