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In: Accounting

(a) Prepare a Statement of Cash Flows for the year ended 30 June 2020 using the...

(a) Prepare a Statement of Cash Flows for the year ended 30 June 2020 using the direct method, ignoring GST.

Show all workings on the Workings page.

(b) Using the relevant information from the question above, identify two (2) specific items (including their values) which causes a difference between Net Profit and Net Cash from Operating Activities and analyse why it causes a difference.

The following financial statements relate to Clarke Ltd for the financial year ended 30 June 2020.

Balance Sheet as at 30 June

2020 2019
ASSETS $ $
Current Assets
Cash 212,500 176,000
Accounts Receivable 100,000 200,000
Allowance for Doubtful Debts (10,000) (5,000)
Inventory 45,000 42,000
Prepaid rent 5,000 2,500
Total current assets 352,000 415,000
Non-Current Assets
Land 550,000 500,000
Equipment 900,000 800,000
Accumulated Depreciation - Equipment (650,000) (560,000)
Total non-current assets 800,000 740,000
TOTAL ASSETS 1,152,500 1,155,500
LIABILITIES & EQUITY
Liabilities
Accounts Payable 45,000 35,000
Wages Payable 30,000 15,000
Income Tax Payable 28,000 24,000
Loan Payable -- 400,000
Total liabilities 103,000 474,000
Owner's Equity
Share Capital 750,000 500,000
Retained Profits 249,500 181,500
Revaluation Surplus 50,000 0
Total Equity 1,049,500 681,500
TOTAL LIABILITIES AND EQUITY 1,152,500 1,155,500

Clarke Limited's Income Statement for the year ended June 2020

Revenue $
     Net Sales 750,000
     Cost of Sales 225,000
     Gross Profit 525,000
Expenses
Wage expense 300,000
Depreciation Expense - Equipment 90,000
Bad Debt Expense 10,000
Rent expense 4,000
Interest expense 3,000
Total expenses 407,000
Net Profit Before Tax 118,000
Income Tax Expense 35,400
Net Profit After Tax 82,600

Additional information:

Interest expense is classified as an operating cash flow.

The company paid dividends in 2020.

Land was revalued during the 2020 financial year.

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