Question

In: Accounting

The Trial Balance of Nuqa Ltd is provided below 2020 2019 Bank Overdraft 60,000 Cash...

The Trial Balance of Nuqa Ltd is provided below

2020 2019

Bank Overdraft 60,000

Cash 29,000 0

Sales 1,200,000 1,150,000

Cost of Goods Sold 800,000 714,000

Insurance Expense 30,000 27,000

Wages Expense 120,000 121,000

Doubtful Debts Expense 5,000 4,000

Other Expenses 65,000 78,000

Accounts Payable 70,000 75,000

Accounts Receivable 90,000 88,000

Allowance for Doubtful Debts 10,000 11,000

Inventory 80,000 82,000

Accrued Wages 12,000 10,000

Prepaid Insurance 8,000 6,000

Plant & Equipment 550,000 600,000

Accumulated Dep. on Plant & Equip. 125,000 110,000

Loan Payable 150,000 130,000

Share Capital 200,000 200,000

Retained Earnings 10,000 0

Accumulated Losses 0 26,000

Additional Information

Depreciation was $28,000 in 2019 and $25,000 in 2020. Loss on disposal in 2020 was $15,000.

i)Calculate receipts from customers

ii)Calculate payments to suppliers

iii)Calculate payments to employees

iv)Calculate net investing cash flows

v)Calculate financing cash inflows

vi)Calculate net profit for 2020

vii)Reconcile net profit with operating cash flows, using the direct method.

viii)Use your answer for (vii) to suggest two ways in which the company could improve its operating cash flows by managing current assets and liabilities.

Expert Solution

i) Allowance for Doubtful Debts at year end = Allowance for Doubtful Debts at beginning + Doubtful Debts Expense for 2020 -write off

10000 = 11000+ 5000 - write off

10000= 16000 -write off

Write off = 16000-10000 = 6000

receipts from customers =Beginning accounts receivable +net credit sales -Ending accounts receivable-Write off

= 88000 + 1200000 - 90000-6000

= 1192000

ii)Purchase for 2020 =cost of goods sold for 2020+ Ending inventory - beginning inventory

= 800000 +80000 - 82000

= 798000

payment to suppliers = Beginning accounts payable +purchase-ending accounts payable

= 75000+798000-70000

= 803000

iii)payment to employees= Accrued wages at beginning + wage expense for 2020 -Accrued wages at end

= 10000 + 120000 - 12000

= 118000

iv)Net Book value of property plant and equipment =Gross book value -accumulated depreciation

2020 = 550000-125000 = 425000

2019=600000-110000= 490000

Net cash flow from investing activity = Beginning net book value -depreciation expense for2020 - ending net book value-loss on disposal

= 490000 - 25000 -425000-15000

= 25000

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