An Analysis of Possible Reconciling Items
An analysis of the annual financial statements of O’Connell Corporation reveals the following:
a. The company had a $5 million extraordinary loss from insurance proceeds received due to a tornado that destroyed a factory building.
b. Depreciation for the year amounted to $9 million.
c. During the year, $2 million in cash was transferred from the company’s checking account into a money market fund.
d. Accounts receivable from customers increased by $3.5 million over the year.
e. Cash received from customers during the year amounted to $169 million.
f. Prepaid expenses decreased by $1 million over the year.
g. Dividends declared during the year amounted to $8 million; dividends paid during the year amounted to $6 million.
h. Accounts payable (to suppliers of merchandise) increased by $2.7 million during the year.
i. The liability for accrued income taxes payable amounted to $5 million at the beginning of the year and $3 million at year-end.
In the computation of net cash flows from operating activities by the indirect method, explain whether each of the above items should be added to net income, deducted from net income, or omitted from the computation. Briefly explain your reasons for each answer.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.