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needs to be corrected Topic: You are an accountant of a medium-sized manufacturing company. You prepared the income statement for 2018 that showed net income
needs to be corrected Topic: You are an accountant of a medium-sized manufacturing company. You prepared the income statement for 2018 that showed net income of $10 million and a statement of cash flows, using the indirect method, that showed cash flow from operating activities of negative $10 million. This just didn't make sense to your boss. Required: Prepare a memo explaining: 1. How operating cash flows using the indirect method is determined. 2. How operating cash flow using the direct method is determined. 3. Whether or not switching from one method to another would change the amount of cash flow from operations. Explain. Subject: operating cash flows 1) With the indirect method, cash flow is calculated by taking the value of the net income at the end of the reporting period. 2) While preparing the cash flow statement under the indirect method, it is first assumed that all the net income is received in cash and then adjustments are made for amounts which have not been received in cash. 3) When it comes to whether or not switching to the direct method would change the amount of cash flow from operations. Switching to direct method will not affect the amount of cash flow from operations. Thanks for the post; however, I am asking to redo the post as, except for Requirement 3 to some extent, you did not correctly or adequately address any of the Requirements of the topic. Requirement 1: This is to explain the indirect method of preparing a statement of cash flows. The explanation should include the adjustments made to net income and how each of the adjustments affect cash flow from operations. Requirement 2: This is to explain the direct method of preparing a statement of cash flows. The explanation should include the items and how each of these will affect cash flow from operations. Requirement 3: Yes, cash flow from operations will be the same under both methods. But why? Explain. Please redo the discussion. Please note that to discuss" the topic, each Requirement needs at least one good paragraph with several good sentences. Please be reminded that a sentence or two is not considered a "discussion
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