Prepare the statement of cash flows using the indirect metho

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Reference no: EM13854136

Question # 1

Locate an article from a financial periodical from the past 2 years about a company that restated its financial statements due to an error in accounting principal. Examples of periodicals are CFO and Journal of Accountancy.
Write a paper of no more than 700 words with references discussing the restatement of the company, the accounting principals involved, the effect of errors and changes on financial statements, and the affect on the stockholders.
Format your paper consistent with APA guidelines.


Question # 2 please:

Ron Nord and Lisa Smith are examining the following statement of cash flows for Carpino Company for the year ended January 31, 2007

CARPINO COMPANY

Statement of Cash Flows

For the Year Ended January 31, 2007

Sources of cash

 

From sales of merchandise

$380,000

From sale of capital stock

420,000

From sale of investment (purchased below)

80,000

From depreciation

55,000

From issuance of note for truck

20,000

From interest on investments

6,000

Total sources of cash

961,000

Uses of cash

 

For purchase of fixtures and equipment

330,000

For merchandise purchased for resale

258,000

For operating expenses (including depreciation)

160,000

For purchase of investment

75,000

For purchase of truck by issuance of note

20,000

For purchase of treasury stock

10,000

For interest on note payable

3,000

Total uses of cash

856,000

Net increase in cash

$ 105,000



Ron claims that Carpino's statement of cash flows is an excellent portrayal of a superb first year with cash increasing $105,000. Lisa replies that it was not a superb first year. Rather, she says, the year was an operating failure, that the statement is presented incorrectly, and that $105,000 is not the actual increase in cash. The cash balance at the beginning of the year was $140,000.
Instructions
With the class divided into groups, answer the following.

a. Using the data provided, prepare a statement of cash flows in proper form using the indirect method. The only noncash items in the income statement are depreciation and the gain from the sale of the investment.

b. With whom do you agree, Ron or Lisa? Explain your position.

Read the scenario presented in Broaden Your Perspective (BYP) 12-6 on p. 641 in Ch. 12 of Financial Accounting.


Prepare the statement of cash flows using the indirect method. The only noncash items are depreciation and the gain on sale from investments.

Write a memo to shareholders explaining whether the organization had a performing or underperforming first year.

Discuss the reasons for your conclusion, referencing actual numbers from the statement of cash flows you developed.

Reference no: EM13854136

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