Question

Homework Assignment 2: Chapter 23: Statement of Cash Flows Data presented below are from the records of Antonio Brasileiro SA December 31, 2019 December 31, 2018 Plant assets RS335,000 RS215,000 Long-term investments 10,000 53,000 Current assets other than cash 85,000 60,000 Cash 15,000 8,000 R$445,000 R$336,000 Retained earnings RS 56,000 RS 20,000 Ordinary shares 254,000 254.000 Bonds payable 75,000 Current liabilities 40,000 22,000 Accumulated depreciation 20,000 40,000 RS445,000 R$336,000 Additional information: 1. In 2019, the company sold for R$34,000 held-for-collection and selling debt investments carried at a cost of R$43,000 on December 31, 2019. No unrealized gains or losses were recorded on this investment in 2019. 2. In 2019, the company sold for R$8,000 plant assets that cost R$50,000 and were 80% depreciated. The loss was incorrectly charged directly to Retained Earnings. 3. Net income as reported on the income statement for the year was R$48,000. 4. The company paid dividends totaling R$10,000. 5. Depreciation charged for the year was R$20,000. Instructions Prepare a statement of cash flows for the year 2019 using the indirect method.

Answer 1

ANTONIO BRASILEIRO S.A.
Cash flow Statement for the year ended December 31,2019
Description	Amount(R$)	Amount(R$)
Net Income as per Income statement		48,000
Add:
Depreciation	20,000
Loss on sale of debt investments	9,000	29,000
Cash generated from operations		77,000
Adjustments for
(Increase)/Decrease in current assets other than cash	(25,000)
Increase/(Decrease) in Bonds payable	75,000
Increase/(Decrease) in Current liabilities	18,000	68,000
Net cash from operating activities		145,000
Cash from investing activities
Sale of debt investments	34,000
Purchase of plant assets	(170,000)
Sale of plant assets	8,000
Net cash from investing activities		(128,000)
Cash from financing activities
Dividend paid	(10,000)
Net cash from financing activities		(10,000)
Net increase in cash and cash equivalents		7,000
Beginning balance of cash and cash equivalents		8,000
Ending balance of cash and cash equivalents		15,000
Working Notes
(i)
Loss on sale of plant assets - Since, the loss on sale of plant assets for R$ 2,000
was charged directly to the Retained earnings( R$ 8,000 less book value R$ 10,000)
and was not included in the Net income of R$ 48,000,it would not be adjusted to compute
the cash income.
(ii)
Loss on sale of debt investments
Sales Value of debt investments		34,000
Less: Cost of debt investments		43,000
Loss on sale of debt investments		9,000
Since,no unrealized gains or losses were recorded on investments in 2019, the loss
on sale of debt investments would be charged to the Income statement for the year
2019
(iii)
Computation of purchase of plant assets
Beginning Balance on Jan 1,2019		215,000
Less: Sale of plant asset during the year		(50,000)
Balance of plant assets		165,000
Purchases during the year(balancing value)
Ending Balance as on Dec 31,2019		335,000
Less:Balance of plant assets after sale		165,000
Purchase of plant assets during 2019		170,000