CASH FLOW POLUUTER CORP
José A Valdés 3 de octubre de 2013
Sem. De Contabilidad Prof. Alejandro Méndez
Case 11-1
Polluter Corp
Facts of Case:
Polluter Corp is an SEC registrant and manufacturer household cleaning products. In the course of operations, Polluter Corp emits emission pollutants; The Company receives emissions allowances, (EAs,) from the government for 2010 to 2030. Polluter Corp will upgrade their production facilities in 2014 in order to reduce their pollutants. Emissions Allowance are given by the government in order to offset pollution expense, with the goal being to reduce pollution 2010 Transactions After 2014, Polluter will emit less pollution, but until then it will need more EAs in order to avoid penalties.
Transactions Fiscal Year 2010 After 2014, Polluter Corp will emit less pollution, but until then it will need more EA’s in order to avoid penalties, Polluter buys extra EA’s for 2012 from Clear Air Corp for $3 million. In an effort to offset the cost of the April 2, 2010 purchase of 2012 Eas, the company sold Eas with a vintage year of 2016 to Dirty Chemical Corp for $2 million.
Answer Required:
1. What is the appropriate classification in the statement of cash flows in the company’s December 31, 2010, financial statements for its purchase of 2012 EAs from Clean Air Corp ?
According to the FASB codification section 805-50-3-1-2, these allowance will be recognized as intangible assets at their cost. When a company buys any assets, the cash outflow due to purchase will be classified in the investing section of the statement of cash flows. Standard Accounting Entry for Purchase DR CR
Emissions Allowance, Assets 3,000,000 Cash 3,000,000
2. What are the appropriate classifications in the statement of cash flows in the company’s December 31, 2010, financial statements for its sale of 2016 EAs to Dirty Chemical Corp Clean Air Corp?
According to the FASB Statement 153 the gain from sale of the 2016 EAs
Sem. De Contabilidad Prof. Alejandro Méndez
Case 11-1
Polluter Corp
Facts of Case:
Polluter Corp is an SEC registrant and manufacturer household cleaning products. In the course of operations, Polluter Corp emits emission pollutants; The Company receives emissions allowances, (EAs,) from the government for 2010 to 2030. Polluter Corp will upgrade their production facilities in 2014 in order to reduce their pollutants. Emissions Allowance are given by the government in order to offset pollution expense, with the goal being to reduce pollution 2010 Transactions After 2014, Polluter will emit less pollution, but until then it will need more EAs in order to avoid penalties.
Transactions Fiscal Year 2010 After 2014, Polluter Corp will emit less pollution, but until then it will need more EA’s in order to avoid penalties, Polluter buys extra EA’s for 2012 from Clear Air Corp for $3 million. In an effort to offset the cost of the April 2, 2010 purchase of 2012 Eas, the company sold Eas with a vintage year of 2016 to Dirty Chemical Corp for $2 million.
Answer Required:
1. What is the appropriate classification in the statement of cash flows in the company’s December 31, 2010, financial statements for its purchase of 2012 EAs from Clean Air Corp ?
According to the FASB codification section 805-50-3-1-2, these allowance will be recognized as intangible assets at their cost. When a company buys any assets, the cash outflow due to purchase will be classified in the investing section of the statement of cash flows. Standard Accounting Entry for Purchase DR CR
Emissions Allowance, Assets 3,000,000 Cash 3,000,000
2. What are the appropriate classifications in the statement of cash flows in the company’s December 31, 2010, financial statements for its sale of 2016 EAs to Dirty Chemical Corp Clean Air Corp?
According to the FASB Statement 153 the gain from sale of the 2016 EAs