the cash method of accounting is generally selected by the very small firm that wants to help its cash flow by avoiding the payment of taxes on income not yet received
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- Which of the following is not an example of a cash outflow? Select one: a. Purchase of inventory on credit b. pay employee wages and salaries c. cash withdrawal by the owner d. payment of income tax e. payment of accounts payableWhich of the following is not correct with respect to accrual accounting? Accrual accounting can produce large discrepancies between the firm’s reported profit performance and the amount of cash generated from operations. The principles that govern revenue and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cash-basis accounting. Reported accrual accounting net income for a period always provides an accurate picture of underlying economic performance. Accrual accounting does not decouple measured earnings from operating cash inflows and outflows.Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $2,739,000 1,100, 000 1,639,000 $641, 000 578, 000 1,219,000 $ 420,000 Net operating income $ Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically…
- The direct write-off method is generally not permitted for financial reporting purposes because a. Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income.b. This method is primarily used for tax purposes.c. It is too difficult to accurately estimate future bad debts.d. Accounts receivable are not stated for the amount of cash expected to be collected.Which of the following is not normally increased by a cash inflow transaction? a) Advances from Customers b.) Unearned Revenue from Customer Loyalty Program c.)Unearned Revenue from Warranty Contracts d.)Deposits on Returnable ContainersDescribe how changes in non-cash items, such as depreciation and deferred taxes, can impact a company's cash flow statement. How can analysts adjust for these non-cash items when using the cash flow statement for financial analysis?
- Explain how EBITDA differs from Free Cash Flows (FCF) and discuss the types of businesses for which this differences will be especially small or large?Is it impossible for a company to report positive net income on the income statement but have negative cash flows from operating activities on the statement of cash flows? Yes or No? Thanks :)Net income is not the same as net cash provided by operating activities. Net cash provided by operating activities is usually significantly larger than net income. In general, why do differences exist between net income and net cash provided by operating activities? Which is more important to a company: net cash or net income?
- IAS would prefer enterprise to use the direct method of presenting cash flow statement. However, almost all enterprises use the indirect method of presentation. Why do the accounting standard and most companies appear to differ on this issue?Which of the following is a reason that banks may favor fee compensation over balance compensation? Balance compensation is not as visible as fees for budgeting purposes. The strategy involves attracting deposits to fund their loans. Earning credits used to determine the value of collected balances are taxable. Deposit balances increase liabilities on the balance sheet.which of the following statements regarding free cash flow is true? a.Free cash flow measures the operating cash flow of a company after the purchase of inventory. b.Free cash flow is a valuable tool for evaluating net income. c.Free cash flow ignores productive capacity. d.None of these choices are correct.
