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Case Study 08-1: Go With the Flow Essay

$20 million were received from the insurance carrier as reimbursement for a building. The money will be used for the pension plan instead of rebuilding the facility. Sale of Accounts Receivable
The Company sold $11million of its accounts receivable and got cash and beneficial interest in the transferred receivables. “The company uses the “financing technique” to reduce more expensive bank debt, because the interest cost on the securization financing is less than the company can get on their bank debt” (Case 08-1). Company must pay down the debt with the proceeds. The sold receivables are not reflected in the accounts receivable balance in the company’s balance sheet. Acquisition of Property, Plant, and Equipment Account

$12 million of capital expenditures were incurred when manufacturing equipment and machinery was acquired. The 2%/15, net 45 were included in the accounts payable balance (the amounts were unpaid as of year-end, but will be paid in early January). Case 08-1. Canvas.com. Retrieved 09, 2013, from https://mtu.instructure.com/courses/854016/files/29576974?module_item_id=5996906 Issues

Did Go With the Flow Inc. properly classify their transactions in the Cash Flow Statement. Rule or Standard
Insurance Settlement Proceeds
ASC 320-45-10-12. 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. Analysis


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