Question

Set out below are Palm Ltd's financial statements for the year ended 31 December Palm Ltd Comparative Statements of Financial Position as at 31 December 2020 2019 $ $ Assets Cash at Bank Accounts Receivable (net) Prepaid Expenses Inventory Equipment Accumulated Depreciation - Equipment Total Assets 56,000 123,000 10,000 52,000 270,000 (118,000) 393.000 47,000 107,000 9,000 46,000 262,000 (109,000) 362.000 $ $ $ $ Liabilities and Shareholders' Equity Accounts Payable Accrued Expenses Payable Income Taxes Payable Notes Payable Ordinary Shares Retained Earnings Total Liabilities and Shareholders' Equity 18,000 5,000 7,000 120,000 213,000 30.000 393.000 11,000 9,000 5,000 130,000 200,000 7,000 362.000 $ $ Palm Ltd Statement of Profit or Loss for the Year Ended 31 December 2020 Sales Gain on sale of equipment $ 1,339,000 3,000 1,342,000 Less: $ Cost of sales Operating expenses (excluding depreciation) Depreciation expense Interest expense Income taxes expense Net profit after tax 908,000 346,000 24,000 14,000 12,000 (1.304,000) $ 38.000

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Requirement 1: Direct Method Note-a $ Note-b Note-c $ $ $ $ 1,323,000 907,000 351,000 14,000 10,000 $ -1,282,000 $ 41,000 Note-d Cash flows from operating activities Cash received from customers Cash paid to suppliers Cash paid for operating expense Cash paid for Interest Cash paid for taxes Net cash provided by operating activities Cash flows from investing activities Proceeds on sale of equipment Purchase of equipment Net cash used by investing activities Cash flows from financing activities Issue of Common Stock Payment of Note Payable Dividend paid Net cash used by financing activities Note-e $ $ 12,000 -32,000 $ -20,000 $ $ $ 13,000 - 10,000 - 15,000 Note-f $ -12,000 Net increase in cash and cash equivalents Cash and cash equivalents, Beginning Cash and cash equivalents, Ending $ $ $ 9,000 47,000 56,000 Working: (a) Cash received from customers Sales revenue Less: Increase in accounts receivable Cash received from customers $ $ $ 1,339,000 -16,000 1,323,000 (b) Cash paid to suppliers Cost of goods sold Add: Increase in Inventory $ $ $ $ $ 908,000 6,000 914,000 -7,000 907,000 Less: increase in Accounts Payable Cash paid to suppliers for goods (c) Cash paid for Operating Expense $ 346,000 1,000 Operating Expense Add Increase in Prepaid Rent Add: Decrease in accrued expense payable Cash paid for operating Expense $ $ $ 4,000 351,000

(d) Taxes Paid $ Income Tax Expense Less: Increase in income tax payable Proceeds on sale of equipment $ $ 12,000 -2,000 10,000 e. Cash received for sale of equipment: Depreciation Expense Less: increase in accumulated Depreciation Depreciation on sale of equipment $ $ $ 24,000 -9,000 15,000 Cost of equipment sold Less: Accumulated Depreciation Book Value add: gain on sale of equipment Cash received from sale of equipment $ $ $ $ $ 24,000 - 15,000 9,000 3,000 12,000 Beginning Equipment add: Purchase $ $ $ $ $ 262,000 32,000 294,000 -270,000 24,000 Less: Ending Equipment Cost of equipment sold f. Dividend Payment Beginning Retained Earning Add: Net Income Less: Ending Retained Earning Dividend Payment $ $ $ $ 7,000 38,000 -30,000 15,000 Requirement 2: Recon $ 38,000 $ S 24,000 -3,000 - 16,000 Net Income Adjustment to reconcile net income to net cash provided by operating activities: Depreciation Expense Gain on sale of Equipment Increase in accounts receivable Increase in inventory Increase in prepaid rent Increase in accounts payable Decrease in Accrued Expense Payable Increase in income tax payable Net cash provided by operating activities $ $ -6,000 $ S $ $ $ -1,000 7,000 -4,000 2,000 41,000