Fey Enterprises recorded a restructuring charge of $16.2 million during fiscal 2
ID: 2576284 • Letter: F
Question
Fey Enterprises recorded a restructuring charge of $16.2 million during fiscal 2016 related entirely to the closing of its division located in Denver, Colorado. The company’s financial statement footnotes indicated that expected employee separation payments amounted to $12.6 million and that fixed asset write-downs accounted for the remainder. Nickolas had never before incurred restructuring charges. At the end of the year, the company’s balance sheet included a restructuring accrual of $2,700,000.
The cash flow effect of Fey Enterprises’ restructuring during fiscal 2016 is:
Explanation / Answer
The cash flow effect of Fey Enterprises’ restructuring during fiscal 2016 is: $9,900,000
Explanation: The total restructuring charge accrued was $16.2 million because asset write-downs are not accrued. That is there is no credit to a liability account for write-downs, the assets are credited (reduced). Thus, the company must have paid $12,600,000 - $2,700,000 = $9,900,000 in cash during fiscal 2016
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