Cash Flow Analysis Answer the following questions from your text:

8.11 Equity Method for Minority, Active Investments. U.S. GAAP requires firms to account for equity investments in which ownership is between 20% and 50% using the equity method. Ace Corporation owns 35% of Spear Corporation during 2014. Spear Corporation reported net income of $100.4 million for 2014 and declared and paid dividends of $25 million during the year.

a. Calculate the equity income that Ace Corporation reports in 2014 related to its ownership in Spear Corporation.

b. What does Ace Corporation report in its statement of cash flows for 2014 related to its ownership in Spear Corporation?

c. Assuming that Ace Corporation’s balance sheet account, Investment in Spear Corporation, is $1,100 million at the beginning of 2014, what is the balance in the account at the end of 2014? Support your answers with calculations.

9.2 Revenue Recognition. Revenues are at the core of a firm’s ability to grow and prosper; thus, they are central to the analysis of a firm’s profitability. Although the time-of-sale method is the most common technique employed to recognize revenues, in some instances, a strong argument can be made for recognizing revenue before the product has been completed and delivered. Discuss circumstances in which this scenario is appropriate