I need someone to help me with this. The assignment required to write as memo.Th
ID: 2509996 • Letter: I
Question
I need someone to help me with this. The assignment required to write as memo.Thank you in advance.
USING CODIFICATION 542 Researching GAAP Directions l. Research the related U.S. GAAP using Situation Kelly Company, a small corporation, is prepar ing its 2016 financial statements. At the end of 2016, the company purchased a building for $100,000, paid $20,000 as a down payment, and signed an $80,000 mortgage. Kelly's presi- dent is concerned about how to report this transaction on the company's statement of cash flows and has asked you to "look into this issue the FASB's Accounting Standards Codi- fication and prepare a short memo to the president that summarizes how to report this transaction on the 2016 statement of cash flows. Cite your reference and appli- cable paragraph numbers for me."Explanation / Answer
To: Kelly’s President
From: Jack
Date: April 4, 2018
Subject: “Reporting in statement of cash flows”
Dear Sir’
As per your question about reporting of purchased building in Statement of Cash Flow. I am giving you the correct disclosure of such transactions as per U.S. GAAPs & FASB.
It is given by you that your company purchased a building for $100000, for which $20000 down payment has been made and a mortage signed for $80000. So $20000 whill be recognized under investing activities of the statement of cash flows because $20000 is a outflow of cash and $80000 will be disclosed in the lower & separate part of statement of cash flows as note only but not under any of three activities of this statement.
So this transaction will be disclosed as follow;
Investing activities;
Purchase of building ($20000)
Supplementary information;
Purchase of building by signing a mortage $80000
Thus above given is the correct & accurate disclosure of such transaction.
I hope this will help your company in accurate reporting & disclosure of such transactions in the statement of cash flows.
Thanks & Regards
Jack