Question

Question 1 The following information was extracted from the books of Sweet River Ltd as at September 30, 2013 2013 2012 $ $ ASSETS Cash 318,000 30,000 320,000 16,000 280,000 382,000 24,000 340,000 12,000 280,000 320,000 (32.000 964,000 Accounts Receivable Inventory Prepaid Expenses Land Equipment Accumulated Depreciation 0 1326,000 LIABILITIES AND EQUITY Accounts Payable Accrued Expenses Income Tax Payable Long Term Loan Ordinary Share Capital Retained Earnings 120,000 40,000 104,000 30,000 24,000 260,000 720,000 188,000 964,000 0 0 720,000 84,000 1,326,000

CASH FLOW OUTLINE

Answer 1

Sweet River Ltd Cash Flow Statement (Indirect Method) Cash flows from Operating Activities: Amount Amount Net Income $ 168,000 Adjustments for : Depreciation | $ 36,000 Loss on Sale of Equipment $ 2,000 $ 38,000 Operating cashflow before changes in working capital $ 206,000 Chnages in Working Capital Decrease in Accounts Receivables $ 6,000 Increase in inventory S (20,000) Decrease in Prepaid Expense S 4,000 Decrease in Accounts payable S (16,000) Decrease in Accrued expenses $ (10,000) Increase in Income Tax payable $ 24,000S (12,000) Net Cash from operating activities $ 194,000 Cash Flows from Investing Activities Cash received on sale of Equipment $ 34,000 Purchase of Equipment S(360,000) Net Cash used in Investting activities S (326,000)

$ 260,000 S (64,000) Cash Flows from Financing Activities Issue of term Loan Dividend paid Net Cash used in Financing activities Net Increase in Cash Cash. Beginning balance Cash, Ending Balance $ 196,000 $ 64,000 $ 318,000 S 382,000

Working Notes: Satement of increase /(Decrease) of current assets & current liabilities (except cash & cash equivalents) Particulars Accounts Receivable Inventory Prepaid expense Accounts Payable Accrued Expense Income Tax Payable $ $ $ $ $ $ 2012 30,000 320,000 16,000 120,000 40,000 - $ $ $ $ $ $ 2013 Change 24,000 $ 6,000 340,000 $ 20,000 12,000 $ 4,000 104,000 $ 16,000 30,000 $ 10,000 24,000 $ 24,000 Eqiupment purchased for cash $ $ 320,000 40,000 Ending value Property, plant and equipment Add: Cost of Equiment sold Less : Beginng value of Property, plant & Equipment Eqiupment purchased for cash $ 360,000