Question

Below are the income statement and comparative balance sheet of Doone Corporation for year ending Dec 31, 2019 is given below. All amounts in Canadian dollars.

Required: Prepare the cashflow statement, clearly including operating, financing and investing activities up to the net change in cash using the Indirect method as of Dec 31, 2019.

Doone Corporation
Income Statement
For the Year ended Dec 31, 2019
Sales Revenue 950,000
Less: Cost of Goods Sold 520,000
Gross Profit    430,000
Less: Selling, General and Administrative Expenses      81,000
Operating profit       349,000
Less: Depreciation expense      65,000
Earnings before interest and taxes    284,000
Less: Interest expense      44,000
Earnings before taxes    240,000
Less: tax expense (40%)         96,000
Net Income    144,000

Doone Corporation
Comparative Balance Sheet
Dec 31, 2018 and 2019
            2018     2019
Cash          12,000 16,000
Marketable securities          23,000 24,000
Accounts receivables          75,000                         85,000
Inventory          76,000                          58,000
Investments          57,000          45,000
Total current assets        243,000           228,000

Property, Plant & Equipment             620,000                      880,000
Less: Accumulated Depreciation         42,000                50,000
Net Prop., Plant & Equipment           578,000              830,000
Total Assets                     821,000           1,058,000

Accounts payable            78,000                 52,000
Notes payable            20,000    12,000
Accrued expenses            11,000                                   8,000
Salaries payable                           6,000                                 10,000
Total current liability                       115,000 120,000
Bonds payable          160,000               215,000
Total liabilities                       275,000               335,000

Share capital                       300,000 400,000
Retained Earnings                                246,000                               323,000
Total Shareholder’s equity                  546,000                        723,000

Total Liabilities and                  821,000            1,058,000           
        Shareholders equity

Answer 1

Doone Corporation
Statement of Cash Flows
Indirect Method
For the year ended Dec 31, 2019
	Calculation		Amount (in canadian $)
Cash Flow from Operating Activities:
Net Income			144,000
Adjustment to reconcile net income to net cash flow from operating activities:
Depreciation		65,000
Account Receivable increase	(75000-85000)	(10,000)
Inventory decrease	(76000-58000)	18,000
Account payable decrease	(78000-52000)	(26,000)
Accrued expenses decrease	(11000-8000)	(3,000)
Salaries payable increase	(6000-10000)	4,000	48,000
Net cash flow: Operating Activities			192,000
Cash Flow from Investing Activities:
Cost of new plant assets	(880000-620000)	(260,000)
Decrease in Investments	(57000-45000)	12,000
Increase in Marketable securties	(23000-24000)	(1,000)
Net cash flow: Investing Activities			(249,000)
Cash Flow from Financing Activities:
Notes payable decrease	(20000-12000)	(8,000)
Bonds payable increase	(160000-215000)	55,000
Share capital increase	(300000-400000)	100,000
Net cash flow: Financing Activities			147,000
Total Cash Flow increased			90,000