In: Accounting
(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.