Questions from Financial Accounting

Q: Why might it be difficult to compare two otherwise similar firms in

Why might it be difficult to compare two otherwise similar firms in terms of their operating profits?

Q: One writer stated, “Depreciation expense is a firm’s chief source

One writer stated, “Depreciation expense is a firm’s chief source of cash for growth.” A reader criticized this statement by replying, “The fact remains that if companies had elected, in any year, to...

Q: A firm operated at a net loss for the current year,

A firm operated at a net loss for the current year, but cash flow from operations was positive. How can this happen?

Q: The sale of equipment for an amount of cash greater than the

The sale of equipment for an amount of cash greater than the carrying value of the equipment results in a cash receipt equal to the carrying value of the equipment plus the gain on the sale, which app...

Q: “One can most easily accomplish the reporting objective of the income

“One can most easily accomplish the reporting objective of the income statement under the accrual basis of accounting and the reporting objective of the statement of cash flows by issuing a single inc...

Q: “The accrual basis of accounting creates the need for a statement

“The accrual basis of accounting creates the need for a statement of cash flows.” Explain.

Q: “The statement of cash flows provides information about changes in the

“The statement of cash flows provides information about changes in the structure of a firm’s assets and sources of financing.” Explain.

Q: A student remarked: “The direct method of computing cash flow

A student remarked: “The direct method of computing cash flow from operations is easier to understand than the indirect method. Why do the majority of firms follow the indirect method in preparing the...

Q: A South African paper company, SAPC Limited (SAPC), reports

A South African paper company, SAPC Limited (SAPC), reports noncurrent Interest-Bearing Borrowings of $1,634 million at September 30, Year 6. SAPC applies IFRS and reports its results in millions of U...

Q: The statement of cash flows classifies cash expenditures for interest expense as

The statement of cash flows classifies cash expenditures for interest expense as an operating activity but classifies cash expenditures to redeem debt as a financing activity. Explain this apparent pa...