Case Study 08-01

In: Business and Management

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Words 313
Pages 2
Case 08-01
Go With the Flow INC.
1.
Insurance Settlement Proceeds
According to ASC 230-10-45-12, “All of the following are cash inflows from investing activities:
• a. Receipts from collections or sales of loans made by the entity and of other entities' debt instruments (other than cash equivalents and certain debt instruments that are acquired specifically for resale as discussed in paragraph 230-10-45-21) that were purchased by the entity
• b. Receipts from sales of equity instruments of other entities (other than certain equity instruments carried in a trading account as described in paragraph 230-10-45-19) and from returns of investment in those instruments
• c. Receipts from sales of property, plant, and equipment and other productive assets
• d. not used
• e. Receipts from sales of loans that were not specifically acquired for resale. That is, if loans were acquired as investments, cash receipts from sales of those loans shall be classified as investing cash inflows regardless of a change in the purpose for holding those loans.
For purposes of this paragraph, receipts from disposing of loans, debt or equity instruments, or property, plant, and equipment include directly related proceeds of insurance settlements, such as the proceeds of insurance on a building that is damaged or destroyed.”
Based on the above principal, the proceeds from the insurance company for the destroyed building should be considered investing activities because the money received was an insurance settlement and the proceeds of the insurance were on a building that was destroyed.
2.
Sale of Accounts Receivable
According to ASC 230-10-45-14, “All of the following are cash inflows from financing activities:
• a. Proceeds from issuing equity instruments
• b. Proceeds from issuing bonds, mortgages, notes, and from other short- or long-term borrowing
• c.…...

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