Last year Art charged $3,119,200 Depreciation on the Income Statement of Andrews
ID: 2578139 • Letter: L
Question
Last year Art charged $3,119,200 Depreciation on the Income Statement of Andrews. If early this year Art sold all its depreicable assets for their book value, the effect on Andrews's financial statements would be (all other items remaining equal): Select: 1 Increase Net Cash from operations Decrease Net Cash from operations on the Cash Flow Statement No impact on Net Cash from operations Just impact the Balance Sheet Balance Sheet DEFINITIONS: Common Size: The common size column simply represents each item as a percentage of total assets for that year. Cash: Your end-of-year cash position. Accounts Receivable: Reflects the lag between delivery and payment of your products. Inventories: The current value of your inventory across all products. A zero indicates your company stocked out. Unmet demand would, of course, fall to your competitors. Plant & Equipment: The current value of your plant. Accum Deprec: The total accumulated depreciation from your plant. Accts Payable: What the company currently owes suppliers for materials and services. Current Debt: The debt the company is obligated to pay during the next year of operations. It includes emergency loans used to keep your company solvent should you run out of cash during the year. Long Term Debt: The company's long term debt is in the form of bonds, and this represents the total value of your bonds. Common Stock: The amount of capital invested by shareholders in the company. Retained Earnings: The profits that the company chose to keep instead of paying to shareholders as dividends. ASSETS 2020 2019 CommonSize Cash $5,048 2.5% $17,159 Accounts Receivable $15,202 7.6% $15,012 Inventory $23,963 12.0% $19,484 Total Current Assets $44,213 22.1% $51,655 Plant & Equipment $245,856 122.9% $188,400 Accumulated Depreciation ($90,074) -45.0% ($73,683) Total Fixed Assets $155,782 77.9% $114,717 Total Assets $199,995 100.0% $166,371 LIABILITIES & OWNERS' EQUITY Accounts Payable $6,969 3.5% $8,256 Current Debt $0 0.0% $0 Long Term Debt $48,909 24.5% $48,909 Total Liabilities $55,878 27.9% $57,165 Common Stock $12,080 6.0% $12,080 Retained Earnings $132,037 66.0% $97,126 Total Equity $144,117 72.1% $109,206 Total Liab. & O. Equity $199,995 100.0% $166,371 Cash Flow Statement The Cash Flow Statement examines what happened in the Cash Account during the year. Cash injections appear as positive numbers and cash withdrawals as negative numbers. The Cash Flow Statement is an excellent tool for diagnosing emergency loans. When negative cash flows exceed positives, you are forced to seek emergency funding. For example, if sales are bad and you find yourself carrying an abundance of excess inventory, the report would show the increase in inventory as a huge negative cash flow. Too much unexpected inventory could outstrip your inflows, exhaust your starting cash and force you to beg for money to keep your company afloat. Cash Flows from Operating Activities: 2020 2019 Net Income (Loss) $34,911 $30,367 Depreciation $16,390 $11,693 Extraordinary gains/losses/writeoffs $0 $0 Accounts Payable ($1,287) $2,965 Inventory ($4,479) ($11,861) Accounts Receivable ($190) ($394) Net cash from operations $45,345 $32,771 Cash Flows from Investing Activities: Plant Improvements ($57,456) ($48,200) Cash Flows from Financing Activities: Dividends Paid $0 $0 Sales of Common Stock $0 $0 Purchase of Common Stock $0 $0 Cash from long term debt $0 $9,000 Retirement of long term debt $0 $0 Change in current debt (net) $0 ($11,300) Net cash from financing activities $0 ($2,300) Net change in cash position ($12,111) ($17,729) Closing cash position $5,048 $17,159 Annual Report Page 1 Top 2020 Income Statement (Product Name:) Art Ant Ace Axe Abc Na Na Na 2020
Total Common
Size Sales $59,526 $20,034 $40,872 $58,584 $5,941 $0 $0 $0 $184,957 100.0% Variable Costs: Direct Labor $8,552 $2,340 $5,279 $6,771 $2,155 $0 $0 $0 $25,096 13.6% Direct Material $18,222 $5,460 $12,124 $17,913 $1,492 $0 $0 $0 $55,211 29.9% Inventory Carry $832 $721 $428 $894 $0 $0 $0 $0 $2,876 1.6% Total Variable $27,606 $8,520 $17,831 $25,579 $3,647 $0 $0 $0 $83,183 45.0% Contribution Margin $31,920 $11,514 $23,041 $33,006 $2,294 $0 $0 $0 $101,774 55.0% Period Costs: Depreciation $3,119 $4,079 $3,640 $4,686 $867 $0 $0 $0 $16,390 8.9% SG&A: R&D $742 $646 $669 $783 $82 $0 $0 $0 $2,922 1.6% Promotions $1,500 $1,300 $1,500 $1,500 $1,500 $0 $0 $0 $7,300 3.9% Sales $2,000 $3,000 $3,000 $3,000 $1,500 $0 $0 $0 $12,500 6.8% Admin $671 $226 $461 $661 $67 $0 $0 $0 $2,086 1.1% Total Period $8,032 $9,250 $9,270 $10,630 $4,016 $0 $0 $0 $41,199 22.3% Net Margin $23,888 $2,263 $13,770 $22,376 ($1,722) $0 $0 $0 $60,575 32.8%
Explanation / Answer
Selling depreciable assets at book value impacts the balance sheet only, and increases the cash flow from investing activities. It will not impact the operating activities of the cash flow statement since there is no gain or loss if sold at book value of the asset.
Therefore, correct option is Just impact the balance sheet only.
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