Text Module 2 / 11:

3. The statement of cash flows for Snap-On Incorporated for the year ended December 31, 2013, includes the following items (excerpts only).

(in $ millions) 2013 2012

Cash flows from operating activities:

Net earnings $ 359.7 $ 314.6

Depreciation 51.2 50.2

Change in accounts receivable; (increase) decrease (42.0) (43.4)

Change in accounts payable; increase (decrease) 8.4 16.6

Net cash provided by operating activities $ 377.3 $ 338.0

a. Explain why the companys net earnings are not the same as its net cash provided by operating activities.

b. Why does Snap-On add back depreciation to compute net cash provided by operating activities? Is depreciation a source of cash?

Text Module 2 / 6:

4. a) Explain how we account for a cost that creates an immediate benefit versus a cost that creates a future benefit. What is capitalization?

b) Describe the flow of costs for the purchase of a machine. At what point do such costs become expenses? Why is it necessary to record the expenses related to the machine in the same period as the revenues it produces?