Ohare Company’s only asset as of January 1, 2014

Problem 8-4 Depreciation and Cash Flow

P8-4 Ohare Company’s only asset as of January 1, 2014, was a limousine. During 2014, only the following three transactions occurred:

Services of $100,000 were provided on account. All accounts receivable were collected.

Depreciation on the limousine was $15,000.

Required

1.        Develop an income statement for O’hare for 2014.

2.        Determine the amount of the net cash inflow for O’hare for 2014.

3.        Explain why O’hare’s net income does not equal net cash inflow.

4.        If O’hare developed a cash flow statement for 2014 using the indirect method, what amount would appear in the category titled Cash Flow from Operating Activities?

Hint: Although this is simplistic and brief information, be sure to use the proper format for the statements. It might be helpful to actually prepare a cash flow statement and show it next to the income statement for reference

TUTORIAL PREVIEW

1.                                                        O’HARE COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2014

      Service Revenue                                                                                                            $100,000

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