Consider the following information concerning a firm’s income statement for fiscal year (FY) 2050:

Sales revenues $865,000

Cost of goods sold $535,000

Various expenses $200,000

*“Various expenses” include depreciation expenses and others (e.g., SG&A, R&D, etc.).

In addition, assume that the applicable corporate income tax rate is 10% and that the firm pays no tax when its taxable income falls below zero (ignore any tax loss carryforward in case it bothers you). The firm has no debt interest expenses.

1. Suppose that the firm had underestimated its expenses by omitting depreciation expenses $140,000, it turns out. That is, the firm should have reported $340,000 as “Various expenses”, including depreciation. Recall that depreciation expense is a noncash expense (i.e., no cash outflow involved). 

Required: Recalculate 

(i) net income with the corrected amount of expenses. In addition, determine 

ii) how this correction would affect the firm’s cash available at the end of FY 2050 (i.e., increase or decrease, no calculation needed). Show the steps/calculation needed.