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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Researching GAAP

Situation

Kelly Company, a small corporation, is preparing its 2019 financial statements. At the end of 2019, the company purchased a building for $100,000, paid $20,000 as a down payment, and signed an $80,000 mortgage. Kelly’s president is concerned about how to report this transaction on the company’s statement of cash flows and has asked you to “look into this issue for me.”

Directions

  1. 1. Research the related U.S. GAAP using the FASB’s Accounting Standards Codification and prepare a short memo to the president that summarizes how to report this transaction on the 2019 statement of cash flows. Cite your reference and applicable paragraph numbers.

To determine

Prepare a short memo to the president that summarizes the manner in which the given transaction would be reported on the 2019 statement of cash flows.

Explanation

MEMO

From:

ABC

Student

To:

The President

Company K

Dated: December 31, 2019

Sub: Reporting the transaction on the 2019 statement of cash flows

Dear Sir,

In the given transaction, the company has purchased a building for $100,000 during the end of the year 2019. The company has made $20,000 as a down payment and $80,000 as a mortgage.

According to FASB ASC 230-10-50-3: Statement of Cash Flows: Overall: Disclosure, the information about all investing and financing transactions that affect assets and liabilities but do not result in receipt of cash or cash payments during a period, must be reported in related disclosures to the statement of cash flows. This should be made neither in a description or it can be summarized in a schedule, as the purchase has been made partly by paying the cash and partly by mortgage. The cash related transaction must be reported in the statement of cash flows...

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