Polluter Corp
DATE: December 7, 2012
TO: Polluter Corp.
FROM:
SUBJECT: Emissions Allowances
Facts:
Polluter Corp, has recently spent $3 million to purchase emission allowances, with a vintage year of 2012, in order to meet the need for additional EAs in the fiscal years 2010-2014. They will also need to sell EAs, with a vintage year of 2016, in order to offset the costs of the purchase. It is to my understanding that the need for EAs arose because of the significant amount of greenhouse gases emitted by the Company 's antiquated manufacturing facilities. In order to remedy this situation, plans were made to upgrade the facilities in 2014. The reduced gas emissions that the upgraded facilities are expected to provide will render EAs with vintage years beyond 2014, useless, as they would no longer be needed to meet the gas emission standards. Consequently, the Company took action as explained above.
Issues:
Polluter Corp entered into two separate transactions in the fiscal year 2010, which must be appropriately classified on the statement of cash flows. Each transaction can be recorded as an operating, investing, or financing activity on the statement of cash flows.
Financing activities consist of obtaining cash from issuing debt and repaying the amounts borrowed. This also includes equity transactions, such as obtaining cash from stockholders, the purchase of treasury stock, and paying shareholders. Investing activities include the purchase or disposal of property, plant, and equipment as well as other productive assets, which are held for use in the production of goods or services. Investing activities also include the lending of money and collecting of loans. Operating activities consist of all transactions that are not classified as investing or financing. In general, this includes any activities involving the production and sale of goods or services that generate revenue. Operating activities also include transactions that affect net income .
After
TO: Polluter Corp.
FROM:
SUBJECT: Emissions Allowances
Facts:
Polluter Corp, has recently spent $3 million to purchase emission allowances, with a vintage year of 2012, in order to meet the need for additional EAs in the fiscal years 2010-2014. They will also need to sell EAs, with a vintage year of 2016, in order to offset the costs of the purchase. It is to my understanding that the need for EAs arose because of the significant amount of greenhouse gases emitted by the Company 's antiquated manufacturing facilities. In order to remedy this situation, plans were made to upgrade the facilities in 2014. The reduced gas emissions that the upgraded facilities are expected to provide will render EAs with vintage years beyond 2014, useless, as they would no longer be needed to meet the gas emission standards. Consequently, the Company took action as explained above.
Issues:
Polluter Corp entered into two separate transactions in the fiscal year 2010, which must be appropriately classified on the statement of cash flows. Each transaction can be recorded as an operating, investing, or financing activity on the statement of cash flows.
Financing activities consist of obtaining cash from issuing debt and repaying the amounts borrowed. This also includes equity transactions, such as obtaining cash from stockholders, the purchase of treasury stock, and paying shareholders. Investing activities include the purchase or disposal of property, plant, and equipment as well as other productive assets, which are held for use in the production of goods or services. Investing activities also include the lending of money and collecting of loans. Operating activities consist of all transactions that are not classified as investing or financing. In general, this includes any activities involving the production and sale of goods or services that generate revenue. Operating activities also include transactions that affect net income .
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