Gerry Co. has a gross profit of $1,200,000 and depreciation expense of $400,000. Selling and administrative expense is $250,000. Given that the tax rate is 40 percent, compute the cash flow from operations for Gerry Co.

Question

Quizplus · Accepted Answer

The cash flow from operations is calculated as follows:

Gross Profit - Selling and Administrative Expenses - Depreciation Expense = Operating Income

$1,200,000 - $250,000 - $400,000 = $550,000

Then, we multiply this operating income by (1-Tax Rate) to get the cash flow from operations:

$550,000 x (1-0.40) = $330,000

Therefore, the cash flow from operations for Gerry Co. is $730,000 ($550,000 + $330,000).

Gerry Co Has a Gross Profit of $1,200,000 and Depreciation Expense