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This addresses the Statement of Cash Flows for Carpino Co.

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Ron Nord and Lisa Smith are examining the following statement of cash flows for Carpino Company for the year ended January 31, 2007.

Ron claims that Carpino's statement of cash flows is an excellent portrayal of a superb first year with cash increasing $105,000. Lisa replies that it was not a superb first year. Rather, she says, the year was an operating failure, that the statement is presented incorrectly, and that $105,000 is not the actual increase in cash. The cash balance at the beginning of the year was $140,000.

Write a 1-page memo to shareholders explaining what the organization had a performing or underperforming first year.

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Solution Summary

The solution discusses the exercise by providing a sample memo for the Carpino Company Statement of Cash Flows analysis and determines if the company really did have a good year or if they had a year with poor performance.

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Sample memo for practice problem, to be used as a sample memo/guide/reference only:

To: Management
From: Accounting Department

It is apparent that the organization had an under-performing first year of operations. This can be identified by the net loss of $30,000 sustained this year. The statement of cash flows as prepared by Ron and Lisa was not prepared correctly, so an adequate analysis of the company's cash position cannot be ...

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