Assume that you serve on the board of a local golf and country club. In preparation for
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Second, he indicates that the club paid about $200,000 last month to relocate the 18th fair- way and green closer to the clubhouse. The treasurer indicates that although these costs have been reported as expenses in the club's own monthly financial statements, he feels an argument can be made for reporting them as part of land and land improvements (a long- lived asset) in the year-end financial statements that would be provided to the bank. He explains that, by recording these payments as an addition to a long-lived asset, they will not be shown as a reduction in operating cash flows.
Required
1. Does the sale of accounts receivable to generate immediate cash harm or mislead any- one? Would you consider it an ethical business activity?
2. What category in the statement of cash flows is used when reporting cash spent on long- lived assets, such as land improvements? What category is used when cash is spent on expenses, such as costs for regular upkeep of the grounds?
3. What facts are relevant to deciding whether the costs of the 18th hole relocation should be reported as an asset or as an expense? Is it appropriate to make this decision based on the impact it could have on operating cash flows?
4. As a member of the board, how would you ensure that an ethical decision is made?
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... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Related Book For
Fundamentals of Financial Accounting
ISBN: 978-1259103292
4th Canadian edition
Authors: Fred Phillips, Robert Libby, Patricia Libby, Brandy Mackintosh
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