Chapter 10, Problem 10.4C

Consolidated Cash Flows
Analysis

The consolidated cash flows from operations of Jones Corporation and its subsidiary Short Manufacturing for 20X2 decreased quite substantially from 20X1 despite the fact that consolidated net income increased slightly in 20X2.

Required
a. What factors included in the computation of consolidated net income may explain this difference between cash flows 1im operations and net income?
b. How might a change in credit terms extended by Short Manufacturing explain a part of the difference?
c. How would an inventory write−off affect cash flows from operations?
d. How would a write−off of uncollectible accounts receivable affect cash flows from operations?
e. How does the preparation of a statement of cash flows differ for a consolidated entity compared with that of a single corporate entity?