?Why can?t we pay our shareholders a dividend?? shouted your new boss. ?This income statement you prepared
Question:
?Why can?t we pay our shareholders a dividend?? shouted your new boss. ?This income statement you prepared for me says we earned $5 million in our first half-year!? You were hired last month as the chief accountant for Enigma Corporation, which was organized on July 1 of the year just ended. You recently prepared the financial statements below.
You have just explained to your boss, Robert James, that although net income was $5 million, operating activities produced a net decrease in cash. Unable to understand your verbal explanation, he has asked you to prepare a written report explaining the apparent discrepancy between Enigma?s profitability and its cash flows. To increase the chances of your boss?s understanding the situation, you want to include in your report a determination of net cash flows from operating activities demonstrating how it is possible for operating activities to simultaneously produce a positive net income and negative net cash flows.
Required:Determine net cash flows from operating activities by both the direct and indirect methods.
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas