The partner in charge of the Spencer Corporation audit comes by your desk and leaves a letter

Question:

The partner in charge of the Spencer Corporation audit comes by your desk and leaves a letter he has started to the CEO and a copy of the statement of cash flows for the year ended December 31, 2017. Because he must leave on an emergency, he asks you to finish the letter by explaining
(1) The difference between the net income and cash flow amounts,
(2) The importance of operating cash flow,
(3) The sustainable source(s) of cash flow, and
(4) Possible suggestions to improve the cash position. Spencer is a small corporation that relies on its auditor for financial statement preparation.
The partner in charge of the Spencer Corporation audit comes

Date
James Spencer III, CEO
James Spencer Corporation
125
Bay Street
Toronto, ON
Dear Mr. Spencer:
I have good news and bad news about the financial statements for the year ended December 31, 2017. The good news is that net income of $100,000 is close to what we predicted in the strategic plan last year, indicating strong performance this year. The bad news is that the cash balance is seriously low. Enclosed is the Statement of Cash Flows, which best illustrates how both of these situations occurred at the same time . . .
Instructions
Complete the letter to the CEO, including the four elements that the partner asked for.

Financial Statements
Financial 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...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1119048534

11th Canadian edition Volume 1

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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