Question

The shortcut for determining how to convert from accrual to cash when creating a statement of cash flows is similar to which other shortcut we used this semester? The shortcut for determining the conversion from GAAP to tax line items. The shortcut for determining the conversion from Contract Liability to Sales Revenue. The shortcut for determining the conversion of corridor smoothing to pension expense. The shortcut for determining the conversion from LIFO to FIFO Retail Inventory Method. QUESTION 2 Which of the following income statement accounts most likely has no real cash effect? Income Tax Expense Rent Revenue Pension Expense Gain on Factoring QUESTION 3 Net cash flow from operating activities for Year 4 for Spencer Corporation was $400,000. On the financial statements for Year 4, Spencer reported cash dividends paid on common stock was $20,000; depreciation and amortization was $12,000; and the increase in Accounts Receivable was $24,000. Based on this information, what was Spencer's net income for Year 4? O 356,000 O 412,000 396,000 364,000

I need help with all three questions, please. Thank you!

Answer 1

Answer 1) The shortcut for determining the conversion from GAAP to tax line items

Since for tax purpose we add back disallowed items and reduce the allowed items.

Answer 2) Gain on Factoring

Since it is the account where only gain on factoring is recorded and actual cash impact is on cash account, which company receives from Finance company on factoring its receivables.

Answer 3) 412,000

	Net Cash from operating activities	$400,000
Less	Depreciation and amortization	$12,000
Add	Increase in Accounts receivables	$24,000
	Net Income	$412,000

Since for the purpose of cash flow from operating activities, we add back depreciation and reduce the increase in accounts receivable from net income. For calculation the net income from Cash flow, reverse calculation has been done by adding the increase in account receivable and deducting the Depreciation and amortization

Dividend will not have any impact on net income, since it is it is balance sheet entry.