Question $4$ please fill in the blanks.

Year$-$end adjustments of Company X include the following items and accounts:

a$)$ Trade Receivables $-$ decrease in Allowance for Doubtful Debts

b$)$ Inventory $-$ reversal of previous write$-$down

c$)$ Property, Plant & Equipment $-$ estimated useful life is revised upwards $($increased$)$ to

calculate depreciation expense

Required:

How do these adjustments affect profitability for the current financial year?

All the adjustments

expense and hence,

profit.

How do these adjustments affect cash flows for the current financial year?

All the adjustments have effect on cash flows.

How would you interpret these adjustments taken together?

The adjustments appear to be

items which could reduce

$.$ and hence, increase

These adjustments have to be carefully reviewed for their validity as management may

revise their estimates for these adjustments in an attempt to boost profit in a year of low

profitability.