Prior to beginning work on this assignment, read Case 9-1 and review the Cash Flow Statement Student Input Sheet Download Cash Flow Statement Student Input Sheet. Your cash flow statement should be completed using the Cash Flow Student Input Sheet. Several book numbers have been changed, so use the column on the Cash Flow Statement Student Input Sheet that corresponds to your class start date.

Complete the Cash Flow Statement Student Input Sheet, and then write a five- to seven-page paper completing Case 9-1. Submit both the final paper cash flow input sheet and the final paper using the instructions provided below.

CHANGE THE FOLLOWING NUMBERS BASED UPON YOUR COURSE START DATE
	Jan-Feb	Mar-Apr	May-Jun	Jul-Aug	Sept-Oct	Nov-Dec
Net Income	-117586	-116586	-115586	-114586	-113586	-112586
Ending Cash Balance	247894	248894	249894	250894	251894	252894
Ending Retained Earnings	-151626	-150626	-149626	-148626	-147626	-146626
Depreciation	21354	21354	21354	21354	21354	21354
				CASH FLOW STATEMENT
Balance Sheets				Net income
	December 31,	December 31,		Adjustments to reconcile net income to net
($ in thousands)	2016	2017		cash provided by operating activities
Assets				Depreciation
Cash	$ 631,975	$ 247,894		Gross accounts receivable
Gross accounts receivable	$ 2,178	$ 35,249		Less: Allowance for doubtful accounts
Less: Allowance for doubtful accounts	$ (1,531)	$ (4,733)		Prepaid expenses
Prepaid expenses	$ 1,219	$ 11,755		Inventories
Inventories	$ 154	$ 12,662		Accounts payable
Gross property, plant, and equipment	$ 471,506	$ 953,796		Accrued salaries and wages
Less: Accumulated depreciation	$ (21,796)	$ (86,512)		Accrued interest on long-term debt
Pre-opening expenses	$ 10,677	$ -		Other accrued liabilities
Other operating assets	$ 21,116	$ 26,601		Construction payables
Total assets	$ 1,115,498	$ 1,196,712		Current maturities, long-term debt
Liabilities and Stockholders Equity				Net cash provided by operating activities
Accounts payable	$ 4,322	$ 14,181		Investing activities
Accrued salaries and wages	$ 945	$ 8,194		Gross property, plant, and equipment
Accrued interest on long-term debt	$ 9,429	$ 9,472		Less: Accumulated depreciation
Other accrued liabilities	$ 9,744	$ 33,502		Pre-opening expenses
Construction payables	$ 32,296	$ 96,844		Other operating assets
Current maturities, long-term debt	$ -	$ 1,573		Net cash used for investing activities
Total current liabilities	$ 56,736	$ 163,766		Financing activities
Deferred revenues	$ -	$ 10,784		Deferred revenues
Long-term debt	$ 473,000	$ 481,427		Long-term debt
Total liabilities	$ 529,736	$ 655,977		Common stock
Common stock	$ 485	$ 506		Capital in excess of par value
Capital in excess of par value	$ 589,827	$ 662,365		Net Cash provided by Financing Activities
Common stock in treasury	$ 29,490	$ 29,490		Net Cash Flow
Retained earnings (deficit)	$ (34,040)	$ (151,626)		Beginning Cash Balance
Total stockholders equity	$ 585,762	$ 540,735		Ending Cash Balance
Total liabilities and equity	$ 1,115,498	$ 1,196,712

• Solve for the unknowns in the preceding schedule. (Hint: Use T-accounts.)
• Make all entries related to the Allowance for credit losses account for 20X020X2.
• Make all entries for bad debts for 20X020X2 assuming that Garrels did not accrue for estimated bad debt losses but instead recorded its bad debt provisions once receivables were determined to be uncollectible. (This is called the direct write-off method.)
• Why does GAAP require the allowance method over the direct write-off method?
• Calculate the cumulative difference in reported pre-tax income under the allowance and direct write-off methods over the 20X020X2 period.

Assume that it is the end of 20X3 and Garrels management is trying to decide on the amount of the bad debt provision for 20X3. Based on an aging of accounts receivable, the accounting department believes that a $400,000 provision is appropriate. However, the company just learned that a customer with an outstanding accounts receivable of $300,000 may have to file for bankruptcy. The decision facing Garrels management is whether to increase the initial provision of $400,000 by $300,000, by some lesser amount, or by nothing at all. What is your recommendation?