Required information [The following information applies to the questions display

Question

Required information [The following information applies to the questions displayed below.] Three different companies each purchased trucks on January 1, 2018, for $76,000. Each truck was expected to last four years or 250,000 miles. Salvage value was estimated to be $6,000 All three trucks were driven 81,000 miles in 2018, 55,000 miles in 2019, 46,000 miles in 2020, and 71,000 miles in 2021. Each of the three companies earned $65,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double- declining-balance depreciation, and company C uses units-of-production depreciation. Answer each of the following questions. Ignore the effects of income taxes. e. Which company will report the lowest amount of cash flow from operating activities on the 2020 statement of cash flows? The cash flow from operating activities will be Depreciation expense for if income tax is not considered a cash flow item

Explanation / Answer

Depreciation is a non cash expenditure as there is no inflow or outflow of cash.

So the cash flow from operating activities will be the same for all the 3 companies.

The cash flow from operating activities will be 65,000 for all the 3 companies if income tax is not considered.

Deprecition expense not a cash flow item.  

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