Question

The comparative, unclassified statement of financial position for Ivanhoe Ltd. shows the following balances at December 31:

Ivanhoe Ltd. Statement of Financial Position December 31
Assets		2018			2017
Cash		$ 16,000			$ 38,000
Term deposits (maturing in 60 days)		0			46,000
Accounts receivable		77,000			40,000
Inventory		104,000			68,000
Land		187,000			234,000
Buildings		908,000			529,000
Accumulated depreciation—buildings		(134,000	)		(188,000	)
Equipment		96,000			67,000
Accumulated depreciation—equipment		(39,000	)		(21,000	)
Total assets		$1,215,000			$813,000
Liabilities and Shareholders’ Equity
Accounts payable		$ 27,000			$ 74,000
Income tax payable		4,000			6,000
Interest payable		22,000			15,000
Bank loan payable—current portion		50,000			42,000
Bank loan payable—non-current portion		902,000			421,000
Common shares		157,000			182,000
Retained earnings		53,000			73,000
Total liabilities and shareholders’ equity		$1,215,000			$813,000

Additional information regarding 2018:

1.		Net income was $13,000.
2.		A loss of $22,000 was recorded on the disposal of a small parcel of land. No land was purchased during the year.
3.		A gain on the disposal of $19,000 was recorded when old building was sold for was sold for $40,000 cash. A new building was purchased for $500,000 and depreciation expense on buildings for the year was $46,000.
4.		Equipment costing $75,000 was purchased while a loss of $11,000 was recorded on equipment that originally cost $46,000 and was sold for $22,000.
5.		The company received $514,000 from new bank loans during the year.
6.		Dividends were declared and paid during the year.
7.		No common shares were issued during the year but some were bought back and retired at the amount they were originally issued at.

(a)

Prepare the statement of cash flows using the indirect approach.

Answer 1

Ivanhoe Ltd.
Statement of Cash flows
At December 31,2018
Cash flows from operating activities:
Net income	$13,000
Adjustments:
Loss on disposal of land	$22,000
Gain on sale of building	($19,000)
Depreciation expense-building	$46,000
Depreciation expense-equipment	$31,000
Loss on sale of equipment	$11,000
Changes in operating assets and liabilities:
Decrease in term deposits	$46,000
Increase in accounts receivable	($37,000)
Increase in Inventory	($36,000)
Decrease in accounts payable	($47,000)
Decrease in income tax payable	($2,000)
Increase in interest payable	$7,000
Increase in bank loan payable-current	$8,000
Net cash flows from operating activities (i)		$43,000
Cash flows from investing activities:
Proceeds from disposal of land	$25,000
Proceeds from sale of buildings	$40,000
Purchase of new building	($500,000)
Purchase of equipment	($75,000)
Proceeds from sale of equipment	$22,000
Net cash flows from investing activities (ii)		($488,000)
Cash flows from financing activities:
Bank loan	$514,000
Repayment of bank loan	($33,000)
Payment of dividends	($33,000)
Repurchase of own shares	($25,000)
Net cash flows from financing activities (iii)		$423,000
Net increase(decrease) in cash (i)+(ii)+(iii)		($22,000)
Beginning cash balance		$38,000
Ending cash balance		$16,000

Calculations:

i. Proceeds from sale of land:

Land
Beginning	$234,000
Ending	($187,000)
Cost of disposal	$47,000
Loss on disposal	($22,000)
Proceeds from disposal of land	$25,000

ii.Depreciation expense on equipment:

Accumulated depreciation on equipment sold
Cost of equipment sold		$46,000
(Less): Book value
Proceeds from sale of equipment	$22,000
Loss on sales	$11,000	($33,000)
Accumulated depreciation on equipment sold		$13,000

Accumulated depreciation-equipment
Equipment (Acc. Dep. On Equip. sold)	$13,000	Beg.	$21,000
End.	$39,000	Depreciation expense(balance figure)	$31,000
Total	$52,000	Total	$52,000

iii.Repayment of bank loan:

Bank Loan
Non-current portion-beginning	$421,000
New bank loan	$514,000
Non-current portion-ending	($902,000)
Payment of bank loan	$33,000

iv.Dividends paid:

Retained earnings
Beginning	$73,000
Net income	$13,000
(Less): Ending	($53,000)
Dividends	$33,000