J. Walter Smith, the Chief Executive Officer of The Kennedy Corporation, is concerned about the proper presentation of the companys Cash Flow Statement and has requested your professional assistance in regard to this matter. In the past, the company simply listed the beginning and ending cash balances on a comparative Balance Sheet and provided no details whatsoever with regard to the changes in cash. The reader was not provided with any details with regard to the current years transactions.

Required:

Please write a Business Letter to Mr. J. Walter Smith advising him on the presentation of the following transactions contained in the Statement of Cash Flows. In your letter, please explain and discuss how and where each of the following six transactions should be shown on the Statement of Cash Flows. You must write a minimum of two full pages. Use 12 point font with a 1 margin all around.

1) To help Mr. Smith understand the importance of the Cash Flow Statement, please explain the importance of the cash flow statement to the reader. In your discussion, what specific items are presented in the Statement of Cash Flows and what specific information is conveyed to the reader of the statement? Please present a detailed discussion.

2) In February of 2015, The Kennedy Corporation sold equipment with a Book Value of $72,500 and an original cost of $158,000 was sold at a loss of $22,000. As a result of this transaction, the company took a book loss on its Income Statement. Please explain to Mr. Smith how and where this transaction should be shown on the Statement of Cash Flows? Please provide a detailed discussion.

3) In analyzing the current assets and current liabilities on the comparative

Balance Sheet, Merchandise Inventory and Prepaid Insurance increased by $75,000 and $15,000 respectively and Accounts Payable increased by $10,000 and Unearned Sales Revenue decreased by $9,000. How and where should these items be shown on the Statement of Cash Flows? Please provide a detailed discussion.

4) On June 05, 2015, Kennedy Corporation acquired a large tract of land in exchange for 15,000 shares of $1.00 par value Kennedy Corporation common stock. The fair market value (FMV) of the Land is $25,000. How and where should this transaction be shown on the Statement of Cash Flows? Please provide a detailed discussion.

5) On July 07, 2015, Kennedy Corporation redeemed $500,000 of its 6% Debenture Bonds at 105. Kennedy Corporation also paid a dividend of $200,000 to its common shareholders. How and where should these transactions be shown on the Statement of Cash Flows? Please provide a detailed discussion.

6) At December 31, 2015, The Kennedy Corporation reported $2,500,000 of net income for the calendar year. It also reported the following transactions: Included in the net income was a book gain on the sale of property for $250,000; it also took depreciation deductions of $300,000 on depreciable assets included in property plant & equipment. Please provide a detailed discussion.