Chapter 1: The Role of Managerial Finance: Problems
Chapter 1: The Role of Managerial Finance: Problems
Problems
P1–2 Accrual income versus cash flow for a period
The Motor Corporation sold vehicles for $500,000 to one specific dealer during the year. At the
financial year end, the dealer still owed The Motor Corporation $350,000. The cost of the
vehicles sold was $400,000, and this cost was incurred and paid by The Motor Corporation.
a. Determine the net profit using the accrual basis of accounting.
b. Determine the net cash flow using the cash basis of accounting.
c. The accountant and financial manager need to present the results to the CEO of The Motor
Corporation. What will be their message regarding the performance of the corporation?