Question

Application Problem 5-6A a1 (Indirect Method)

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
		2020		2019
Assets
Current assets:
Cash		$49,000		$35,770
Accounts receivable		85,060		53,900
Inventory		93,690		99,670
Total current assets		227,750		189,340
Equipment		171,500		142,100
Accumulated depreciation, equipment		(42,630	)	(38,220	)
Land		117,600		166,600
		$474,220		$459,820
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$44,390		$60,960
Dividends payable		12,740		4,900
Total current liabilities		57,130		65,860
Bank loan payable		98,000		137,200
Common shares		147,000		127,400
Retained earnings		172,090		129,360
		$474,220		$459,820

HARLEY HOLDINGS LTD. Statement of Income For the year ended January 31, 2020
Sales revenue				$426,300
Cost of goods sold				289,100
Gross profit				137,200
Expenses
Wages expense		$14,900
Depreciation expense		25,970
Rent expense		14,800
Income tax expense		14,410		70,080
Operation income				67,120
Gain on sale of equipment				980
Net income				$68,100

Additional information:

1.		Equipment costing $34,300 was sold for $13,720.
2.		Land was sold at cost and none was purchased during the year.

(a1) Using the above information, prepare the statement of cash flows for Harley Holdings Ltd. for the year ended January 31, 2020, using indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

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Solution: 68100 Format and Naming convention is not avaiable, can be slightly different, ignore the unused cells: Cash flow Statement - Indirect Method Particulars Amount ($) Cash flow from Operating Activities: Net Income Adjustment to convert net income to cash basis: Depreciation Expense 25,970 Gain on sale of Equipment -980 Increase in Accounts receivable -31160 Decrease in Inventory 5980 Decrease in Accounts Payable -16570 -16760 51340 Net Cash Provided by Operating Activities (A) Cash flow from Investing Activities: Sale of Equipment Sale of Land (166600-117600) Purchase of equipment (142100-34300)-(171500) 137201 49000 -63700 -980 Net Cash used by Investing Activities (B) Cash flow from Financing Activities: Cash dividend paid (172090)-(129360+68100)-(12740-4900) Redemption of bonds payable (98000-137200) Issuance of common stock (147000-127400) -17530 -39200 196001 Net Cash used by Financing Activities (C) Net Increase in cash (A+B+C) Beginning Cash and Cash equivalent Ending Cash and Cash equivalent -37130 13230 35,770 49,000 $ . $ $