How does allowing depreciation help companies?

Module 02 Questions/Problems – Depreciation and Statement of Cash Flows

Write your answers in the space provided for each of the questions below:

Part 1: Answer the following depreciation problems:

A home healthcare care company purchases a van for home visits for $60,000. The van depreciates $15,000 a year. What will the book value of the van be in 1 year? In 2 years? How many years will it be until it’s worth $0?
How does allowing depreciation help companies?
Part 2: For each of the transactions below, assign the appropriate cash-related activity (A-D):
A. Cash flows from operating activities
B. Cash flows from investing activities
C. Cash flows from financing activities
D. Net increase (or decrease) in cash and cash equivalents

$50,000 repayment of long-term loan.
$7,000 proceed from the sale of a used x-ray machine.
$40,000 worth of services rendered.
$15,000 in payments from patients.
$1,000,000 purchase of new office space for expanding services.
$10,250 net cash and cash equivalents at the end of the year.
$500,000 received by the issuance of a long-term bond.
$100,000 proceeds from an investment in a 10-year bond.

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