Minex Corporation owns a number of mine sites, and is involved in exploration, extraction, and refining. Output is sold under long- term contracts, where prices are set, but extraction and exploration decisions are influenced by commodity prices. The operating activities section of the SCF for the past two years:

Required:
1. Does the above analysis suggest high quality of earnings? Explain.
2. Suggest two accounting policies that would contribute to lower quality of earnings, based on the adjustments above.

Transcribed Image Text:

MINEX CORPORATION Statement of Cash Flows 20X3 20X2 Cash flows from operating activities Income (loss) for the period Adjustment for: (7,300)43,200 Depreciation and depletion Deferred development cost amortization Decrease/(increase) in accounts receivable IncreaseNdecrease) in unearned revenue Decrease/increase) in other working capital accounts Deferred income tax Other 11,300 20,700 (2,600) 4,200 7,400 9,300 1,700 42,400 32,400 (6,300) (53,300) 6,100 17,100 (300) 44.700 47100 Net cash from operating activities