Accounting & the 3 Statements
Walk me through the three statements: a company pays $90 cash for software it capitalizes, amortizes $30 in Year 1, then impairs the remaining $60 in Year 2 (25% tax, both charges deductible).
Model answer
Year 1 — IS: only the $30 amortization hits → pre-tax −$30; net income −$22.50. CFS: NI −$22.50 + $30 non-cash amortization = CFO +$7.50; investing −$90 (capitalized outlay) → net cash −$82.50. BS:…
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