ATC 3-5 Writing Assignment How do deferrals affect net income versus cash flow? The following scenarios are independent of each other. 1. During Year 1, a company pays $3,000 cash to purchase supplies. There are $1,000 of supplies on hand at the end of Year 1. 2. On April 1, Year 1, a company pays $4,000 for a one-year insurance policy. 3. On October 1, Year 1, a company collects $12,000 in advance for services that will be performed over the next year. 4. On January 1, Year 1, a company pays $16,000 to purchase a long-term asset. The asset has a $4,000 salvage value and a three-year useful life. Required For each scenario, write a brief memo explaining why amounts recognized in the income statement will be different from amounts shown in the operating section of the cash flow statement for Year 1.
ATC 3-5 Writing Assignment How do deferrals affect net income versus cash flow? The following scenarios are independent of each other. 1. During Year 1, a company pays $3,000 cash to purchase supplies. There are $1,000 of supplies on hand at the end of Year 1. 2. On April 1, Year 1, a company pays $4,000 for a one-year insurance policy. 3. On October 1, Year 1, a company collects $12,000 in advance for services that will be performed over the next year. 4. On January 1, Year 1, a company pays $16,000 to purchase a long-term asset. The asset has a $4,000 salvage value and a three-year useful life. Required For each scenario, write a brief memo explaining why amounts recognized in the income statement will be different from amounts shown in the operating section of the cash flow statement for Year 1.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter3: Accrual Accounting
Section: Chapter Questions
Problem 28BE: Brief Exercise 3-28 Accrual- and Cash-Basis Accounting The following are several transactions for...
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