Entries for the Warren Clinic’s 2020 income statement
Entries for the Warren Clinic’s 2020 income statement are listed below in alphabetical order. Reorder the data in the proper format.
Depreciation expense $ 90,000
General/administrative expenses $70,000
Interest expense $20,000
Investment income $40,000
Net income $30,000
Net operating income (loss) $10,000
Net operating revenues $410,000
Net patient service revenue $400,000
Other revenue $10,000
Purchased services $90,000
Salaries and benefits $150,000
Total expenses $420,000
2. Brandywine Homecare, a not-for-profit business, had revenues of $12 million in 2020. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash.
a. Construct Brandywine’s 2020 income statement.
b. What were Brandywine’s net income, total profit margin, and cash flow?
c. Now, suppose the company changed its depreciation calculation procedures (still within GAAP) such that its depreciation expense doubled. How would this change affect Brandywine’s net income, total profit margin, and cash flow?
d. Suppose the change had halved, rather than doubled, the firm’s depreciation expense. Now, what would be the impact on net income, total profit margin, and cash flow?
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