P4 - 1 3
Positioning of items within cash flow statementâIFRS vs. U.S. GAAP (LO 4-9)
Lend Corp. has a primary business model of borrowing funds at low interest rates and lending
them out at higher interest rates. The balances in Lend Corporationâs balance sheet accounts at
December 31, 2017 are as follows:
Assets Liabilities cash 300,000 40,000 land 300,000 800,000 building 800,000 Accum depr: Building 160,000 Owner's Equity A/R 20,000 Retained Earnings 320,000 Notes Rec 900,000 Contributed capital 1,000,000
During 2018, Lend Corp. has the following transactions:
â Received $45,000 in cash interest on notes receivable.
â Paid $16,000 of cash interest on notes payable.
â Collected $10,000 cash from accounts receivable.
â Paid $40,000 cash to reduce accounts payable.
â Owes $3,000 at the end of the year to administrative employees for work performed.
â Building depreciation is an additional $20,000.
Required:
1. Compute Lend Corpâs 2018 net income.
2. Show Lend Corpâs 12/31/2018 balance sheet.
3. Report Lend Corpâs 12/31/2018 statement of cash flows using the indirect method under
U.S. GAAP.
4. Report Lend Corpâs 12/31/2018 statement of cash flows using the indirect method under IFRS.
Record cash flows from interest received in the cash flows from investing section. Record cash
flows from interest paid in the cash flows from financing section.
5. Compare your net cash flows from operations computed from requirement 3 vs. require- ment 4.
Which do you think better reflects Lend Corpâs fundamental operating cash flows?
P4 - 1 3
Positioning of items within cash flow statementâIFRS vs. U.S. GAAP (LO 4-9)
Lend Corp. has a primary business model of borrowing funds at low interest rates and lending
them out at higher interest rates. The balances in Lend Corporationâs balance sheet accounts at
December 31, 2017 are as follows:
Assets | Liabilities | ||
cash | 300,000 | 40,000 | |
land | 300,000 | 800,000 | |
building | 800,000 | ||
Accum depr: Building | 160,000 | Owner's Equity | |
A/R | 20,000 | Retained Earnings | 320,000 |
Notes Rec | 900,000 | Contributed capital | 1,000,000 |
During 2018, Lend Corp. has the following transactions:
â Received $45,000 in cash interest on notes receivable.
â Paid $16,000 of cash interest on notes payable.
â Collected $10,000 cash from accounts receivable.
â Paid $40,000 cash to reduce accounts payable.
â Owes $3,000 at the end of the year to administrative employees for work performed.
â Building depreciation is an additional $20,000.
Required:
1. Compute Lend Corpâs 2018 net income.
2. Show Lend Corpâs 12/31/2018 balance sheet.
3. Report Lend Corpâs 12/31/2018 statement of cash flows using the indirect method under
U.S. GAAP.
4. Report Lend Corpâs 12/31/2018 statement of cash flows using the indirect method under IFRS.
Record cash flows from interest received in the cash flows from investing section. Record cash
flows from interest paid in the cash flows from financing section.
5. Compare your net cash flows from operations computed from requirement 3 vs. require- ment 4.
Which do you think better reflects Lend Corpâs fundamental operating cash flows?