Question

The following information is for Harley Holdings Ltd. for the year ended January 31, 2020. HARLEY HOLDINGS LTD. Statement of Financial Position As at January 31 2019 2020 Assets Current assets: $45,000 $32,850 49,500 Cash 78,120 Accounts receivable 86,040 91,530 Inventory 209,160 173,880 Total current assets 157,500 130,500 Equipment Accumulated depreciation, equipment (39,150) (35,100) 108,000 153,000 Land $435,510 $422,280 Liabilities and shareholders' equity Current liabilities: Accounts payable Dividends payable $40,770 $55,980 11,700 4,500 52,470 60,480 Total current liabilities 90,000 126,000 Bank loan payable Common shares Retained earnings 135,000 117,000 158,040 118,800 $435,510 $422,280 HARLEY HOLDINGS LTD. Statement of Income For the year ended January 31, 2020 $391,500 Sales revenue 265,500 Cost of goods sold Gross profit Expenses Wages expense 126,000 $13,680 Depreciation expense Rent expense Income tax expense 23,850 13,590 13,230 64,350 61,650 Operation income Gain on sale of equipment 900 $62,550 Net income Additional information: Equipment costing $31,500 was sold for $12,600. Land was sold at cost and none was purchased during the year. 1. 2.

Answer 1

Solution

HARLEY HOLDINGS LTD.
Statement of Cash Flows
For the Year ended December 31 , 2020
A. Cash Flows from Operating Activity
Net Income	$           62,550.00
Depreciation expense	$           23,850.00
Gain on sale of Equipment	$              (900.00)
Increase in Accounts Receivable	$        (28,620.00)
Decrease in Inventory	$             5,490.00
Decrease in Accounts Payable	$        (15,210.00)
Net cash provided by Operating activities		$          47,160.00
B. Cash flows from Investing Activities
Sale of land	$           45,000.00
Purchase of Equipment	$        (58,500.00)
Sale Of Equipment	$           12,600.00
Net Cash Used in Investing activities		$              (900.00)
C. Cash Flows from Financing activities
Issue of common stock	$           18,000.00
Repayment of bank loan	$        (36,000.00)
Dividends Paid	$        (16,110.00)
Cash flows used by Financing activities		$        (34,110.00)
Net change in cash		$          12,150.00
Opening cash		$          32,850.00
Ending Cash		$          45,000.00

Cash paid for income tax = $13,230

Working

Calculation of dividend paid
Beginning balance of retained earnings	$    118,800.00
Add: Net income	$       62,550.00
	$    181,350.00
Less: Ending balance of Retained earnings	$    158,040.00
Dividends paid in cash	$       23,310.00
Dividends declared	$       23,310.00
Less: Increase in dividends payable	$       (7,200.00)
Dividends paid in cash	$       16,110.00