Question

*Use the Direct cash flow statement method

The financial reports for Apple Supplies Limited are as follows:

Comparative Balance Sheet for Apple Supplies Limited as at 30 June 2019

	2019	2018
ASSETS
Cash At Bank	52,000	23,000
Accounts Receivable	235,000	221,000
Inventory	73,000	55,000
Prepaid Rent	6,000	5,000
Motor Vehicles	75,000	102,000
Accum. Depn – Motor Vehicles	(22,000)	(32,000)
	419,000	374,000
LIABILITIES
Accounts Payable	91,000	82,000
Dividend Payable	13,000	15,000
Wages Payable	6,000	7,000
Tax Payable	15,000	13,000
Loan	80,000	52,000
	205,000	169,000
EQUITY
Share Capital	97,000	135,000
Retained Earnings	117,000	70,000
	214,000	205,000

Income Statement for Apple Supplies Limited for the year ended 30 June 2019

Sales		1,200,000
COGS		(500,000)
Gross Profit		700,000
Profit on sale of Motor Vehicle		2,000
Rent	51,000
Wages	530,000
Interest	8,000
Depreciation Motor Vehicles	13,000
Profit before Tax		100,000
Less Tax Expense		(30,000)
Profit		70,000

Additional information:

During the year, a motor vehicle which had cost $27,000 was sold for cash.

Required:

Prepare a Cash Flow Statement (by using the Direct Method) for the year ended 30 June 2019. Show all workings.

Answer 1

Solution:

		Amount	Amount
A	Cash Flow from Operating activities :
	Cash Sales	$ 1,186,000
	Cash Purchase	- 509,000
	Rent paid	-52,000
	Wages Paid	-531,000
	Interest Paid	-8,000
	Tax Paid	-28,000	$ 58,000
B	Cash Flow from Financing activities :
	Dividend Paid	- 15,000
	Loan Taken	28,000
	cash paid on Shares buy back	-48,000	- 35,000
C	Cash Flow from Investing Activities :
	Cash proceeds from Sale of Motor	6,000	6,000
D	Total cash Inflow during the year (A + B + C )		29,000
E	Begining Cash Balance		23,000
F	Closing Cash Balance ( D + E )		52,000

Working notes :

1.Cash Sales :

= Sales during the year - increase in Account receivables

= Sales during the year + Opening Account receivables - Closing Account receivables

= 1,200,000 + 221,000 - 235,000

= $ 1,186,000

2. Cash Purchase :

= Puchases during the year - increase in Account payables

= ( Cost of goods sold - opening inventory + Closing inventory ) - ( closing Account payables - Opening Accounts Payables )

= ( 500,000 - 55,000 + 73,000 ) - ( 91,000 - 82,000 )

= 518,000 - 9,000

= 5,09,000

3. Rent paid :

=Rent during the year + increase in prepaid rent

= 51,000 + 1,000

= 52,000

4. Wages paid :

= Wages during the year + decrease in wages payeble

= 530,000 + 1,000

= 532,000

5. Tax paid

= current year tax - increase in tax payable

=current year tax - ( closing tax payable + opening tax payble )

= 30,000- ( 15,000 + 13,000 )

= 30,000 - 2,000

= 28,000

6.Dividend paid = last year's dividend payable .

7.Loan Taken

= Closing Loan amount - Opening loan amount

= 80,000 - 52,000

= 28,000

8. Cash paid on shares buy back :

= Decrease in Share capital + premium paid on buy back

= ( opening capital - Closing capital ) + ( Profit during the year - Dividend payable - Increase in reatined earning )

= ( opening capital - Closing capital ) + ( Profit during the year - Dividend payable - Closing retained earnings - opening retained earnings )

= ( 135,000 - 97,000 ) + ( 70,000 - 13,000 - 117,000 + 70,000 )

= 38,000 + 10000

= 48,000

9. cash proceed on sale of motor :

= Cost of motor sold - accumulated depreciation on motor sold + profit on sale

= Cost of motor sold - ( closing accumulated depreciation + current year depreciation - closing accumulated depreciation ) + profit on sale of motor

= 27,000 - (32,000+ 13,000 - 22,000 ) + 2,000

= 27,000 - 23,000 + 2,000

= 6,000

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