Beaver Company had taxable cash sales of $400,000 in Year 1. Tax-deductible cash expenses in Year 1 were $140,000, and capital cost allowance (CCA) deductions were $60,000. The income tax rate was 40%.
-What was the after-tax net cash inflow from all sources for Year 1?

Question

Quizplus · Accepted Answer

First, we need to calculate the taxable income for Year 1:

Taxable income = Taxable cash sales - Tax-deductible cash expenses - CCA deductions
Taxable income = $400,000 - $140,000 - $60,000
Taxable income = $200,000

Next, we can calculate the income tax payable:

Income tax payable = Taxable income x Tax rate
Income tax payable = $200,000 x 0.4
Income tax payable = $80,000

Finally, we can calculate the after-tax net cash inflow:

After-tax net cash inflow = Taxable cash sales - Income tax payable
After-tax net cash inflow = $400,000 - $80,000
After-tax net cash inflow = $320,000

Therefore, the after-tax net cash inflow from all sources for Year 1 was $180,000 (option C).

Beaver Company Had Taxable Cash Sales of $400,000 in Year