(Analysis of Improper SCF) The following statement was prepared by Abriendo Corporation’s accountant.

Instructions

(a) In general, what are the objectives of a statement of the type shown above for Abriendo Corporation?
Explain.

(b) Identify the weaknesses in the form and format of Abriendo Corporation’s statement of cash flows without reference to the additional information. (Assume adoption of the indirect method.)

(c) For each of the six items of additional information for the statement of cash flows, indicate the preferable treatment and explain why the suggested treatment is preferable.

Transcribed Image Text:

ABRIENDO CORPORATION STATEMENT OF SOURCES AND APPLICATION OF CASH FOR THE YEAR ENDED SEPTEMBER 30, 2008 Sources of cash Net income Depreciation and depletion Increase in long-term debt Changes in current receivables and inventories, less current liabilities (excluding current maturities of long-term debt) Application of cash Cash dividends Expenditure for property, plant, and equipment $111,000 70,000 179,000 14,000 $374,000 $ 60,000 214,000