Reference no: EM132321757
Question : Statement of Cash Flows
Set out below are Square Ltd financial statements for the year ending 31 December:
Square Limited
Comparative Balance Sheet
as at 31 December |
|
|
2018
|
2017
|
|
Assets
|
|
|
|
Cash
|
$ 144,000
|
$ 139,000
|
|
Accounts Receivable
|
270,000
|
250,000
|
|
Allowance for Doubtful Debts
|
(30,000)
|
(35,000)
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|
Inventory
|
180,000
|
160,000
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|
Land
|
150,000
|
150,000
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Plant
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100,000
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90,000
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Accumulated Depreciation - Plant
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(20,000)
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(30,000)
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Total Assets
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$ 794.000
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$ 794,000
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Liabilities and Shareholders' Equity
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|
|
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Bank Overdraft
|
20,000
|
19,000
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Accounts Payable
|
200,000
|
190,000
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|
Accrued Salaries
|
22,000
|
18,000
|
|
Long-term Loan
|
90.000
|
70,000
|
|
Contributed Equity
|
120.000
|
100,000
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Retained Earnings
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342 000
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327 000
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Total Liabilities and Shareholders' Equity
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S 794 000
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$ 794000
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Part C continued
An examination of the accounting records revealed the following additional information applicable to 2018:
a. Contributed Equity increased by the issue of 20,000 $1 bonus shares out of Retained Earnings.
b. During the year, additional plant was purchased in cash.
c. All sales and purchases were on account.
d. Accounts payable pertains to inventory creditors.
e. The bank overdraft in the business is considered to be an integral part of the business's cash management arrangements.
f. Interest expense was paid in cash.
Required: For the purpose of this question, please ignore GST and Income Tax, but show all your workings.
(i) Prepare a Statement of Cash Flows for Square Ltd for the year ending 31 December 2018 usiu the direct method.
(ii) Prepare a reconciliation of net profit to net cash provided from operating activities.
Square Limited- Income Statement
for the year ended 31 December 2018
Sales $ 250,000
Less Cost of Goods Sold (130.000)
Gross Profit 120,000
Less Expenses:
Depreciation Expense 10,000
Bad Debts Expense 25,000
Salaries Expense 30,000
Interest Expense 20.000
Total Expenses (85.000)
Net Profit $45 000