ECON 4 Lecture Notes - Lecture 11: Blue Inc, Cash Flow, Income Statement
Document Summary
They started with the same sales revenue. For the indirect method, we start with the net income. Typically involves laying off employees and incurring severance costs and turnover related expenses to training replacements. This could also involve changes in capital allocations related to closing facilities, selling off property, etc. Even though blue corp hasn"t yet had to restructure, it is applying the conservatism principle and recognizing this anticipated expense of future loss now. Blue: faces a liability of (no cash actually paid) Red: sold of pp&e for a gain. Blue: sold of pp&e for a loss. Dr. gain on sale (-r, -se) 20. Capital expenditure (buying equipment/factors of production) this is an investment activity. Since this is an investment activity, there are no adjustments, you just put in the values. Red: proceeds of and payment of . Also an investing activity so you just report the values. Doesn"t really exist in the real world.
