A company(commutation company) has large investment in capital assets, and a high debt load. It has a history of operating losses, but positive cash flows from operations after material depreciation or amortization charges are added back. Cash flow from investing activities, representing the purchase of capital assets, are negative.
A company ( commutation company ) has large investment in capital assets , and a high debt load .It has a history of operating losses , but positive cash flows from operations after materialdepreciation or amortization charges are added back . Cash flow from investing activities ,representing the purchase of capital assets , are negative .1 .`Accounting policiesCustomer lists represent equipment subsidies granted to customers . These amounts aredeferred and amortized straight- line over a 24 – month period . And represent the cost ofequipment provided to subscription cable customers .Customer listsIn thousand20182017CostAccumulatedCostAccumulatedAmortizationAmortizationCustomer Lists|$418742$ 270908$291600$1 17277No disposal or written – offCash flow20182017Operating activitiesTotal$335400$289100Investing activitiesTotal(5 825100 1(5 1 107200 )Customer base is critical for company and once the customer is established , there is very lowturnover and revenue from customer is secured . Management think that 24 – monthamortization is very conservative , since the average customer stays for at least 10 yearsQuestion :Evaluate accounting policy for customer listImpact of this policy on the statement of cash flow
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