gnment Introducing ChatGPT Periodic vs. Perpetual Methods 8-62 Depreciation, Income Taxes, and Cash Flow (Alternates are 8-61 and 8-63.) The 2011 annual report of Wal-Mart, a major retailing company, listed the following property and equipment ($ in millions): Property and equipment, at cost Less: Accumulated depreciation Property and equipment, net $148,584 43,486 $105,098 The cash balance was $7,395 million. Depreciation expense during the year was $7,641 million. The condensed income statement follows ($ in millions): Revenues Expenses Operating income $421,849 (396,307) $ 25,542 For purposes of this problem, assume that all revenues and expenses, excluding depreciation, are for cash. Thus, cash operating expenses in millions of dollars were ($396,307-$7,641) = $388,666. Table for Problem 8-62 ($ amounts in millions) Revenues (all cash) Cash operating expenses Cash provided by operations before income taxes Depreciation expense Pretax income Income tax expense Net income Supplementary analysis Cash provided by operations before income taxes Income tax payments 2. 40% Income Taxes 1. Zero Income Taxes Straight-Line Accelerated Straight-Line Accelerated Depreciation Depreciation Depreciation Depreciation $ $ $ $ $ $ OBJECTI Lxpenses Operating income Person $ 25,542 For purposes of this problem, assume that all revenues and expenses, excluding depreciation, are for cash. Thus, cash operating expenses in millions of dollars were ($396,307-$7,641)= $388,666. Table for Problem 8-62 ($ amounts in millions) 1. Zero Income Taxes Straight-Line Accelerated 2. 40% Income Taxes Straight-Line Accelerated Depreciation Depreciation Depreciation Depreciation Revenues (all cash) Cash operating expenses Cash provided by operations before income taxes Depreciation expense Pretax income Income tax expense Net income Supplementary analysis Cash provided by operations before income taxes Income tax payments $ Net cash provided by operations $ A 10 $ 1. Wal-Mart uses straight-line depreciation. If accelerated depreciation had been used, assume that depreciation would have been $9,641 million. Assume zero income taxes. Fill in the first two columns of blanks in the accompanying table ($ in millions). 2. Fill in the last two columns of blanks in the table above. Assume an income tax rate of 40%. Assume also that Wal-Mart uses the same depreciation method for reporting to shareholders and to income tax authorities. 3. Compare your answers to requirements 1 and 2. Does depreciation provide cash? Explain as precisely as possible.