The general manager of Qantas had two concerns: the company's worsening cash position ($3000 cash and No bank loan at the end of 2011, No cash and a $7,000 bank loan at the end of 2012) and an inadequate level of net profit. (According to General Manager).
1. The general manager was confused because the company had a $9,000 profit, yet seemed, as noted above, $10,000 worse off in its cash position. Explain briefly how, in general, this difference between profit and cash change can happen.
2. For each of the proposed changes below, considered separately and independently, calculate the effect on 2012 net profit and total assets as at 31st December 2012. Assume a company tax rate (Australia) as income tax rate.
a) The general manager suggested recognizing revenue at an earlier point. If this were done, net account receivables would be increased by $12,000 at 31st December 2011 and by $23,000 at 31st December 2012.