Brandywine Homecare, anot-for-profit business, had revenues of $12 million in2007.  Expenses other than depreciation totaled 75percent of revenues, and depreciation expense was $1.5million.  All revenues were collected in cash during theyear and all expenses other than depreciation were paid incash.

1. Construct Brandywine%u2019s2007 income statement.

2. What were Brandywine%u2019s2007 net income, total profit margin, and cash flow?

3. Suppose the company changedits depreciation calculation procedures (still within GAAP) suchthat its depreciation expense doubled.  How would thischange affect Brandywine%u2019s net income, total profit margin,and cash flow?

4. Explain the differencebetween cash and accrual accounting.  Be sure to includea discussion of the revenue recognition and matchingprinciples.

5. Explain the differencebetween equity section of a not-for-profit business and aninvestor-owned business.