Compute the cash flows from operating activities for Company P using indirect method.

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Answer 1

Question

Chapter 12, Problem 12.15E

1.

To determine

Compute the cash flows from operating activities for Company P using indirect method.

2.

To determine

Compute the quality of income ratio.

3.

To determine

Explain the major reason for the quality of income ratio not being equal to one for Company P.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

Question

Chapter 12, Problem 12.15E

1.

To determine

Compute the cash flows from operating activities for Company P using indirect method.

2.

To determine

Compute the quality of income ratio.

3.

To determine

Explain the major reason for the quality of income ratio not being equal to one for Company P.

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Answer 3

Question

Chapter 12, Problem 12.15E

1.

To determine

Compute the cash flows from operating activities for Company P using indirect method.

2.

To determine

Compute the quality of income ratio.

3.

To determine

Explain the major reason for the quality of income ratio not being equal to one for Company P.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 12.15E

1.

To determine

Compute the cash flows from operating activities for Company P using indirect method.

2.

To determine

Compute the quality of income ratio.

3.

To determine

Explain the major reason for the quality of income ratio not being equal to one for Company P.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 12.15E

1.

To determine

Compute the cash flows from operating activities for Company P using indirect method.

2.

To determine

Compute the quality of income ratio.

3.

To determine

Explain the major reason for the quality of income ratio not being equal to one for Company P.

Answer 6

Chapter 12, Problem 12.15E

1.

To determine

Compute the cash flows from operating activities for Company P using indirect method.

Answer 7

Chapter 12, Problem 12.15E

1.

To determine

Compute the cash flows from operating activities for Company P using indirect method.

Answer 8

2.

To determine

Compute the quality of income ratio.

Answer 9

2.

To determine

Compute the quality of income ratio.

Answer 10

3.

To determine

Explain the major reason for the quality of income ratio not being equal to one for Company P.

Answer 11

3.

To determine

Explain the major reason for the quality of income ratio not being equal to one for Company P.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 12 - Prob. 1Q Ch. 12 - Prob. 2Q Ch. 12 - Prob. 3Q Ch. 12 - What are the major categories of business...Ch. 12 - Prob. 5Q Ch. 12 - Prob. 6Q Ch. 12 - Prob. 7Q Ch. 12 - Prob. 8Q Ch. 12 - Compare the two methods of reporting cash flows...Ch. 12 - Prob. 10Q

Compute the cash flows from operating activities for Company P using indirect method.

Solution Summary: The author explains how to calculate the cash flows from operating activities for Company P using indirect method.

Compute the cash flows from operating activities for Company P using indirect method.

Compute the quality of income ratio.

Explain the major reason for the quality of income ratio not being equal to one for Company P.

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Chapter 12 Solutions