Question

Cash flow statements: Required: Prepare a cash flow statement for Anna's Apples Ltd using the information below. Use the indirect method for operating cash flows. Net profit for year ended 30 June 2015. | Cash Inventory Accounts Payable Unearned Revenue Prepaid Insurance Goodwill Equipment Acc Dep'n Equipment Loan Payable $ 30,000 $ 15,000 $ 12,000 $ 18,000 $ 50,000 $ 300,000 $ 150,000 $ 50,000 $ 20,000 $ 40,000 $ 30,000 $ 15,000 $ 33,000 SO $ 450,000 $ 160,000 $ 100,000 During the year equipment with a cost of $150,000 and accumulated depreciation of $50,000 was sold for $115,000. No other purchases or sales of equipment was made during the year. During the year another business was for cash.

Please explain with full explanations. Thanks

Answer 1

Anna's Apples Ltd Statement of Cash Flow (Indirect Method) For the Year Ended June 30, 2015 Retained Earnings Depreciation expense 40,000 25,000 Profit on sale 15,000 Cash flow from operating activities: Operationg profit before change in working capital Add: Decrease in Current Asset/Increase in Current Liabilities Inventory (40000-30000) Prepaid insurance (33000-18000) 10,000 15,000 25,000 Operating Profit (bal fig) 25,000 40,000 $ 40,000 $ Less: Increase in Current Asset/Decrease in Current Liabilities Accounts payable (30000-15000) Unearned revenue (15000-12000) 15,000 3,000 18,000 32,000 Cash flow from operating activities Explanation: It is mentioned in the question that another business was acquired for cash. Thus the goodwill is not due to revaluation rather it is paid for cash. Hence it is taken as an investment made in cash. Cash flow from investing activities: Sale of equipment 115,000 Please give as many likes for the hard work. 115,000 50,000 Less: Purchase of investment (Goodwill) Cash flow from investing activities $ 65,000 Cash flow from financing activities: Less: Repayment of loan (100000-50000) 50,000 Cash flow from financing activities Change in Cash Add: Cash at the beginning of the year Cash at the end of the year (50,000) 47,000 20,000 67,000

Dr CR 115,000 Beginning Bal. Profit on sale Equipment 450,000 Cash 15,000 -sale Accum. Depr. - Dep on equip. sold Ending Bal. 50,000 300,000 $ 465,000 $ 465,000 Dr 160,000 Equipment -Dep on equip. Sold 40,000 Acc Dep'n Equipment Beginning Bal. Depreciation 50,000 expense -Annual dep. (Bal. Fig.) 150,000 $ 200,000 Ending Bal. $ 200,000 WDV of equipment Cost - Accumulated depreciation = 150000-50000 = 100000 Profit on sale = Sale - WDV = 115000 - 100000 = 15000