Chapter 11, Problem 11.8APEM

(1)

To determine

Accounts receivables:

Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet

To determine: The reason for increase in accounts receivables and effect of increase in accounts receivable in net income of the company.

(2)

To determine

Earnings management:

Earnings management is the tool that is concerned about the organizations’ financial position and activities of business in a positive manner.

To determine: The reason for increase in risk of earnings management of the company due to salary arrangements for CEO and CFO officers.

(3)

To determine

Statement of cash flows

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Cash flows from operating activities:

These refer to the cash received or cash paid in day-to-day operating activities of a company.

To determine: The reason for which the trend in cash flows from operations is combined with the additional events.

(4)

To determine

The Course of action taken by B.