Please help me with Chapter 5 Q 22 and Q23. 22. The net income for the year for
ID: 2351558 • Letter: P
Question
Please help me with Chapter 5 Q 22 and Q23. 22. The net income for the year for Genesis, Inc. is $750,000 but the statement of cash flow reports that the cash provided by operating activities is $640,000. What might account for the difference? I thought AR increased, which would not hit cash. What about AP decreasing, as an example? I thought that would most definitely hit cash when you pay the liability therefore could not be an explaination. Only liability example I could think of was decrease in unearned service revenue. 23. Net income for the year for Carrie, Inc. was $750,000 but the statement of cash flows reports that cash provided by operating activities was $860,000. What might account for the difference. difference in noncash charges (amortization, depreciation, etc) that do not hit the income statement, decrease in receivables, increase in liabilities such as unearned service revenue.Explanation / Answer
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22. The net income for the year for Genesis, Inc. is $750,000 but the statement of cash flow reports that the cash provided by operating activities is $640,000. What might account for the difference? I thought AR increased, which would not hit cash (if AR increased that means that we recorded revenues but did not receive all of our credit sales in cash; thus we are decreasing the net income we started with on the cash flow). What about AP decreasing, as an example? (YES) I thought that would most definitely hit cash when you pay the liability therefore could not be an explaination. Only liability example I could think of was decrease in unearned service revenue.
Reasons for this change could be:
An increase in a current asset (this could be AR)
A decrease in a current liability (this could be AP)
A gain from a sale of investment
23. Net income for the year for Carrie, Inc. was $750,000 but the statement of cash flows reports that cash provided by operating activities was $860,000. What might account for the difference. difference in noncash charges (amortization, depreciation, etc) that do not hit the income statement (The depreciation expense or amortization expense is a non cash transaction that decreased our net income; therefore we must add it bad in), decrease in receivables (YES), increase in liabilities such as unearned service revenue (YES).
Reasons for this change could be:
A decrease in a current asset
An increase in a liability
A loss from a sale of investment
Any depreciation or amortization expense for the year