Questions 5: Statement of Cash Flows: (10 POINTS)

a) What are the purposes of the Statement of Cash Flows?

b) Define and discuss the three major sections of the statement of cash flows.

Questions 6: Define and discuss the two GAAP methods of estimating bad debts on receivables. (5 POINTS)

Questions 7: Inventory (15 POINTS)

a) Why are cost flow assumptions used to determine inventory valuations?

b) Define and explain the rationale for using each of the cost flow assumptions.

c) Why would a company prefer valuing inventory using LIFO?