For Years 1 through 6 Better Products Ltd. had annual net income of $20,000, CCA of $40,000 each year, a 40 percent tax rate, a discount rate of 10 percent and annual cash sales of $200,000. The depreciable assets of Better Products belong in several different classes under the Income tax Act, have a salvage value of zero at the end of six years, and were all bought new at the beginning of Year 1. The present value factors, in simplified form, for 10 percent are:

-Biermann Equipment is a publicly held corporation required to pay income taxes. For the current year it had revenues of $5,000,000 and cash expenses of $3,000,000, and claimed CCA of $200,000. The company has a 30 percent tax rate. What would be the net cash flow for the current year if all revenues were received in cash?

Question

For Years 1 through 6 Better Products Ltd. had annual net income of $20,000, CCA of $40,000 each year, a 40 percent tax rate, a discount rate of 10 percent and annual cash sales of $200,000. The depreciable assets of Better Products belong in several different classes under the Income tax Act, have a salvage value of zero at the end of six years, and were all bought new at the beginning of Year 1. The present value factors, in simplified form, for 10 percent are:
 
-Biermann Equipment is a publicly held corporation required to pay income taxes. For the current year it had revenues of $5,000,000 and cash expenses of $3,000,000, and claimed CCA of $200,000. The company has a 30 percent tax rate. What would be the net cash flow for the current year if all revenues were received in cash?

Quizplus · Accepted Answer

To calculate Biermann Equipment's net cash flow:
Revenue = $5,000,000
Expenses = $3,000,000 + $200,000 (CCA) = $3,200,000
Taxable income = $5,000,000 - $3,200,000 = $1,800,000
Taxes payable = $1,800,000 x 30% = $540,000
Net income = $1,800,000 - $540,000 = $1,260,000
Net cash flow = Net income + CCA = $1,260,000 + $200,000 = $1,460,000
Therefore, the correct answer is C.

For Years 1 Through 6 Better Products Ltd