Question

he 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.

IVANHOE LTD. Statement of Cash Flows-Indirect Method Year Ended December 31, 2018 - TCash flows from operating activities Net income 13000 Adjustments to reconcile net income to Cash flows from operating activities Loss on disposal of land 22,000 Gain on disposal of building (19,000) Depreciation expense 77000 T Loss on disposal of equipment 11,000 T Loss on disposal of equipment 11,000

Answer 1

Preparation of the statement of cash flows using the indirect approach.

IVANHOE LTD

Year Ended 31, 2018

Cash flows from operating activities	Amount ($)	Amount ($)
Net Income		13,000
Adjustments to reconcile net Income to Cash Flows from Operating activities
Loss on Disposal of land	22,000
Gain on disposal of Building	(19,000)
Depreciation Expense	77,000
Loss on disposal of equipment	11,000
Decrease in term deposit	46,000
Increase in account receivables	(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 portion	8,000	30,000
Net cash used by operating activities		43,000
Cash flows from Investing Activities
Proceeds from disposal of land	25,000
Purchase of Building	(500,000)
Purchase of equipment	(75,000)
Proceeds from disposal of equipment	22,000
Proceeds from sale of building	40,000
Net cash used by Investing Activities		(488,000)
Cash flows from financing activities
New Bank Loan taken	514,000
Purchase of Common Shares	(25,000)
Payment of bank loans	(33,000)
Dividend paid	(33,000)
Net cash provided by Financing activities		423,000
Net Increase/ (decrease) in cah		(22,000)
Cash and Cash equivalents as on Jan 1, 2018		38,000
Cash and Cash equivalents as on December 31, 2018		16,000

Working Notes

Land A/C

Particulars	Amount ($)	Particulars	Amount ($)
To balance b/d	234,000	By Loss on Sale By cash (sale) By balance c/d	22,000 25,000 187,000
Total	234,000	Total	234,000

Retained Earning A/C

Particulars	Amount ($)	Particulars	Amount ($)
To Dividend paid To balance c/d	33,000 53,000	By balance b/d By Net Income	73,000 13,000
Total	86,000	Total	86,000