The effect of asset writedowns on cash from operations, In the year ended December 31, 2017,…

The effect of asset writedowns on cash from operations, In the year ended December 31, 2017, Hexham Inc. (Hexham) reported net income of $7,400,000, which included a writeoff✳ of $2,000,000 of company assets. During 2017 accounts receivable increased by $200,000, inventory increased by $350,000, and accounts payable decreased by $30,000. Depreciation expense in 2017 was $556,000. Required: a. What journal entry did Hexham make to record the writeoff of the assets? b. Calculate cash from operations using the indirect method. c. Suppose that at the last minute, Hexham’s management decided to delay writing off the assets from its books: i. What would Hexham’s net income be in 2017? ii. What would Hexham’s cash from operations be in 2017? d. Explain the differences you found between the net income Hexham originally reported and the net income you calculated under c(i). e. Explain the differences you found between the cash from operations numbers you calculated under (b) and (c)(ii).

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