The Rogers Corporation has a gross profit of $704,000 and $318,000 in depreciation expense. The Evans Corporation also has $704,000 in gross profit, with $44,200 in depreciation expense. Selling and administrative expense is $252,000 for each company.
Given that the tax rate is 40 percent, compute the cash flow for both companies.

1. The Rogers Corporation:

The earning of the corporation is: $704,000

The addition to the cash flow includes:

+) Depreciation expense: $318,000

The subtractions to the cash flow includes:

+) Selling and administrative expense: $252,000

+) Paying tax: Tax = 40% x Gross profit = 40% x 704,000 = $281,600

=> The total cash flow is: 704,000 + 318,000 - 252,000 - 281,600 = $488,400

2. The Evans Corporation:

The earning of the corporation is: $704,000

The addition to the cash flow includes:

+) Depreciation expense: $44,200

The subtractions to the cash flow includes:

+) Selling and administrative expense: $252,000

+) Paying tax: Tax = 40% x Gross profit = 40% x 704,000 = $281,600

=> The total cash flow is: 704,000 + 44,200 - 252,000 - 281,600 = $214,600

False

Explanation:

 The given statement is false as, the united state basically has the progressive tax system rather than regressive tex system. The regressive tax is the type of system in which the average rate of the tax are get decreases with the amount of the tax.

The progressive tex system is used in the united state as compared to the regressive tax as the progressive tax has the large percentage of the income tax.

Therefore, the regressive tax system is not used in the united state.