On its income statement for a recent year, American Airlines Group, Inc., the parent company of American Airlines, reported a net loss of $1,834 million from operations. On its statement of cash flows, it reported $675 Real World million of cash flows from operating activities. Explain this apparent contradiction between the loss and the positive cash flows. State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows

Retired $400,000 of bonds, on which there was $3,000 of unamortized discount, for $411,000.

Question

Business

Nelson Case

9 October, 09:53

On its income statement for a recent year, American Airlines Group, Inc., the parent company of American Airlines, reported a net loss of $1,834 million from operations. On its statement of cash flows, it reported $675 Real World million of cash flows from operating activities. Explain this apparent contradiction between the loss and the positive cash flows. State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows

Retired $400,000 of bonds, on which there was $3,000 of unamortized discount, for $411,000.

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Paulina Stafford · Answer 1

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Explanation:

It must be understood that cash flow does not necessarily imply profit or loss.

A company may have been experiencing positive cash flows due selling mostly on a cash basis, whereas the price charged is lower than cost of per unit, hence it would have high amount of cash, whereas the bottom-line is nothing to write home about.

The cash paid on retirement which is $411,000 would impact financing activities as an outflow.

The $3000 unamortized discount would be deducted from net income