Compensated based on both net income and cash flows

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Reference no: EM131220324

You work at Delhaize. Your boss is compensated based on both Net Income and Cash Flows and wants to know the effect (direction and amount) that each of the following transactions would have on 2015 Net Income and 2015 Cash Flows. Assume that there are no taxes. To reiterate, unless the answer is 0, please label each amount with a “+” for an increase and a “–“for a decrease.

A. On 12/31/2015, Delhaize signs a contract with Subway for Subway to sublet space for a year in Food Lion stores for €1,200 (i.e., €100/month). Delhaize will receive cash of €1,200 on 1/1/2016 and the lease begins running on 1/1/2016 (i.e., Subway will take occupancy of the space on 1/1/2016).

2015 Net Income ___

2015 Cash Increase or Decrease ___

B. On 12/01/2015, Delhaize signs a contract with Subway for Subway to sublet space for a year in Food Lion stores for €1,200. Delhaize receives cash of €1,200 on 12/01/2015 and the lease begins running on 12/1/2015 (i.e., the lease runs until 11/30/2016).

2015 Net Income ___

2015 Cash Increase or Decrease___

C. On 12/01/2015, Delhaize signs a contract with Subway for Subway to sublet space for a year in Food Lion stores for €1,200. Delhaize will receive cash of €1,200 on 1/1/2016 and the lease begins running on 12/1/2015 (i.e., Delhaize receives payment after Subway has had occupancy of the property for a month). 2

2015 Net Income___

2015 Cash Increase or Decrease___

Reference no: EM131220324

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