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.

  • CreatedFebruary 21, 2014
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