Problem:
Corporation J is preparing a cash flow statement for a new product. In year 4, unit sales are expected to be 1500 at a price of $12,000 per unit. Production costs are 25% of total sales. Fixed costs are $3,000,000. Overhead and administrative costs are $4,000,000. Depreciation for year 4 is $4,500,000. The company is in the 40% tax bracket.
Required:
Question: Show the entries for calculating the cash flow and the actual cash flow for year 4.
Note: Provide support for your underlying principle.