Question: As indicated in the case at the
As indicated in the case at the beginning of this chapter, Xerox was manipulating income between the years 1997 through 1999. Below are revenue, gross profit, net income, and operating cash flow data for Xerox for the years 1997 through 2000.
The securitization of the finance receivables represents the sale of receivables to a third party. The cash inflow from the sale was shown in the Operating Activities section of the statement of cash flows.
Using these data, identify evidence that proves Xerox was managing its operating cash flow during this period.
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(in millions) 2000 1999 1998 1997 Revenues. $18,701 $19,228 $19,447 $18,144 Gross profit 7,601 9,003 9,580 9,036 Net income (loss). (257) 1,424 395 1,452 Operating cash flow. (663) 1,224 (1,165) 472 Proceeds from securitization of finance receivables. 1,495
> Identify and describe five different measurement attributes.
> Name three exceptions to the general rule that assumes revenue is recognized at the point of sale. What is the justification for these exceptions?
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> What are the three major categories in a corporation’s Equity section?
> You are a member of the most popular student club on campus, the Accounting Antidefamation Organization. Recently, the field of accounting was savagely attacked in an article written by a militant economics student group and published in the student news
> What two factors must be considered in deciding the point at which revenues and gains should be recognized? At what point in the revenue cycle are these conditions usually met?
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> Income as determined by income tax regulations is not necessarily the same as income reported to external users. Why might there be differences?
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> Define comparability.
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> Does reliability imply absolute accuracy? Explain.
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> A manager being pressured to meet expectations in the face of a downturn in operating performance can be tempted to turn to an accounting solution and use accrual estimates and judgments to manage reported earnings. How else might the manager respond to
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> Identify the criteria that an item must meet to qualify for recognition.
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> Diageo is a United Kingdom (UK) consumer products firm, best known in the United States for the following brand names: Smirnoff, Johnnie Walker, J&B, Gordon’s, Seagram’s, and Guinness. Diageo’s 20
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> Identify the major sections (components of income) that are included in a multiple-step income statement.
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> What are two potential causes of non-GAAP accounting?
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