Question: Vincent Fairfield CEO of MetroAir sat at his desk examining

Vincent Fairfield, CEO of MetroAir, sat at his desk, examining the company's latest financial statements. "This just doesn't make sense to me," Vincent thought. "We're reporting $1,662,015 in net income, yet our Cash balance decreased by over $350,000. With these results, I would think the Cash balance should go up by at least $1,000,000."

a. Prepare MetroAir's statement of cash flows using either the indirect or the direct method, as specified by your professor. During the year, the company purchased equipment, issued short-term debt, and retired long-term debt.
b. Prepare a memo to Vincent explaining why he should not necessarily expect an increase in cash when the company reports net income. Be specific and include any issues that should cause Vincentconcern.

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  • CreatedFebruary 21, 2014
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