Zelda Reports Only Half the Cash from the Vending Machines

question 9

Multiple Choice

Zelda reports only half the cash from the vending machines on her cash flow statement and income tax returns.Her purpose in doing so is:

• A)to reduce her income tax liability.
• B)to increase her net income on the financial statement.
• C)to retain the cash for reinvestment in the business.
• D)to make the business more attractive to a buyer.

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Definitions:

FASB

The Financial Accounting Standards Board, an organization responsible for setting and improving financial accounting and reporting standards in the U.S.

IASB

The International Accounting Standards Board, responsible for developing and enforcing the International Financial Reporting Standards (IFRS).

Fair Value Measurement

An accounting approach that provides an estimate of the price at which an asset could be exchanged or a liability settled, based on current market conditions.

Financial Instruments

Contracts that give rise to both a financial asset of one entity and a financial liability or equity instrument of another entity, such as stocks, bonds, or derivatives.