Accounting Techinals
Can anyone help answer this question: Imagine you purchased a machine using $50 cash and $50 debt that generates $20 of revenue per year. Assuming a 5 year useful life, straight-line depreciation with no salvage value and 10% interest and 30% tax rate, how will this affect the financial statements at the end of years 1, 2 and 5?
Also, what would the difference be if the machine had been financed using $50 equity and $50 cash?
you get 0 for efforts bro. 0 for attention since you didn't ask the guy about one missing info : amortizing debt or not ? let's assume it's a bullet bond. and then another 0 for listening, the guy told you 20 in cash flow either pretax or after tax since the question does not make sense if you mention top line revenues. we're going to assume it's after tax. Y1 on the income statement: Depreciation +20 , Interest +5 thus NI +20 - 200.7 - 50.7 = 2.5 Cash Flow Statement : 2.5, adjusted upwards for 20 in depreciation and 50 of financing then downwards of 100 in capex thus net change in cash in Y1 is -27.5 B/S: Cash -27.5 , PPE 80 | Debt 50, Equity 2.5 you can do the other ones yourself.
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