In addition to the assignment in Connect, complete this written assignment using what you learned from the Connect assignment and from this module. Answer the following questions and submit your answers in a Word document. You should refer to the FASB Accounting Standards Codification (FASB ASC), specifically, when answering some of these questions.
The consolidated cash flows from operations from Jones Corporation and its subsidiary Long Manufacturing for 20X2 decreased quite substantially from 20X1 despite the fact that consolidated net income increased slightly in 20X2 compared to 20X1. The consolidated cash flows from the operations statement are prepared using the indirect method.
- What factors included in the computation of consolidated net income may explain the difference between cash flows from operations and net income? Make sure you take into consideration each of the key factors included in determining cash flow from operations under the indirect method of preparing the Statement of Cash Flows.
- How might a change in credit terms during the 20X2 year extended by Long Manufacturing to its customer explain a part of the difference? Please be specific.
- How would an inventory write-off during the 20X2 year affect cash flow from operations? Assume an actual inventory write-off is made after recording initially a lower cost or market adjustment in a prior year's financial statements.
- How would a write-off of uncollectible accounts receivable in the current year's financial statements affect cash flow from operations assuming an allowance account was used initially to record bad debt expense in prior years' financial statements?
- How does the preparation of a statement of cash flows differ for a consolidated entity compared with that of a single corporate entity in general?
Writing Assignment Requirements:
- Write a 2-page paper in a Word document, not counting the title and the reference page(s) and any Exhibit(s) or Appendices. Submissions in excess of 2 pages but no more than 4 pages are acceptable.
- Include in bold type each of the 4 questions with your answers directly below each question.
- Copy and paste each question in bold type into your paper with your answers to each question directly underneath each question.
- Use terms, evidence, and concepts from the module interactive lecture and readings, including professional business language.
- Cite at least 3 credible academic or professional sources for this assignment.