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What is the effect on profit and cash flow

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Question - Consider two separate transactions that take place in December in relation to a company with a financial year end of 31st December (i.e. the transactions occur just before the company's accounting year end). Then explain the effect of each of these transactions on cash flow and profit as will be reported in the annual financial statements about to be produced.

Compose response to the following question below:

What is the effect on profit and cash flow of the following two transactions?

1. Sales of $100,000 (at 50% contribution margin) made on the normal terms of 'one month's credit'. The goods or services sold are delivered to the customer in December.

2. $100,000 paid in December to the supplier of a new production machine that is installed in December and made ready to be operational from 1st January. The asset is expected to have a useful life of 10 years.

Reference no: EM133133401

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