Its your first day of your auditing internship with a public accounting firm and you have been asked to look over a clients statement of cash flows to determine if things have been appropriately categorized as operating, investing, or financing activities. Having earned an A in all of your accounting courses there is only one item that has you in doubt, and that is the classification of notes payable in the statement of cash flows. You know that a note payable representing a bank loan is a financing activity, but this one is a note payable to the clients primary merchandise supplier, so you wonder if the accounting treatment is the same. You discuss this with your supervisor (Reign Dominion) who asks you to research the matter and to provide your results in a brief memo. You are specifically asked to address the following items:

• Obtain the relevant authoritative literature on cash flow classification using the FASB Accounting Standards Codification. What is the specific nine-digit Codification citation (XXX-XX-XX-XX) that specifies the classification of notes payable to suppliers?
• How should notes payable to suppliers be classified?
• Is accounting the same for both short-term and long-term notes payable to suppliers? If not, how do they differ?

Required:

1. Complete the assignment using the memo template provided. Properly complete the top portion of the memo (to: your supervisor, from: your name: cc: me, date, and Re.)
2. Make sure you address each of the three items listed above in your memo.
3. Memo should be free of spelling and grammatical errors. Dont submit something you wouldnt give to your boss!
4. Upload completed memo

MEMO TEMPLATE

Student Name Memo