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Identify and explain the major steps involved in preparing

Intermediate Accounting | 15th Edition | ISBN: 9781118147290 | Authors: Donald E. Kieso ISBN: 9781118147290 164

Solution for problem 5 Chapter 23

Intermediate Accounting | 15th Edition

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Intermediate Accounting | 15th Edition | ISBN: 9781118147290 | Authors: Donald E. Kieso

Intermediate Accounting | 15th Edition

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5
Problem 5

Identify and explain the major steps involved in preparing the statement of cash flows.

Step-by-Step Solution:
Step 1 of 3

STR203 February 18, 2016 Trying to reach an entire market can be costly; you can’t supply everything to everyone Ex. buying meals for the next 3 months – wouldn’t be practical, difficult to store, cost of storing, food expiring Asymmetric warfare – have to think in counterintuitive way Ex. take away key customers to eventually take over the business Understand other companies’ routines/actions à understand decision-­‐making Pros/cons (+/-­‐) to game theory – wrong assumptions à wrong results Look at behavior, can result in a range of outcomes, interacting economic events Threats can be empty – consider credibility Strategic plans – waste of time or planning process is invaluable Asset allocation – Wal-­‐Mart did in a way that others couldn’t copy • Did whatever was necessary for growth • Only so much money to be spent • Borrow limit • Growth (huge) • Assets are necessary to expand, consider tradeoffs Dutch auction – start high, come down; good way to see what people are willing to pay Charlie Brown – kick or don’t kick; from past experience pulled away, understand rival’s experience Guessing game – thinking systematically/symmetrically Companies react to other companies We expect uniformity Firms vs. rivals – study of econ • Doesn’t consider emotion/rationality Price is unifying mechanism in the marketplace • Price is a sponge o Gives/takes info Knowhow – knowing how to do something well/efficiently is an invaluable asset • If you don’t know how to assemble something it doesn’t matter whether you have the necessary parts • Getting information is a cost o Uncertainty, negotiation, recourse • Contracts have to include what they’re not supposed to do also – not costless • Search costs – capturing info Contracting – important to maintain relationships à better prices

Step 2 of 3

Chapter 23, Problem 5 is Solved
Step 3 of 3

Textbook: Intermediate Accounting
Edition: 15
Author: Donald E. Kieso
ISBN: 9781118147290

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Identify and explain the major steps involved in preparing