In: Accounting
Question No.01 The combined balance sheet accounts of
Lever Brothers are presented below.
Lever brothers.
Comparative balance sheet accounts
As of December 31st , 2018 and 2017
2018 2017
ASSETS Rs. Rs.
Cash 42,000 33,750
Account Receivable 70,500 60,000
Inventory 30,000 24,000
Investments(available for sale) 22,250 38,500
Machinery 30,000 18750
Building 67,500 56250
Land 7,500 7,500
269,750 238,750
LIABILITIES Rs. Rs.
Allowances for doubtful accounts 2,250 1,500
Accumulated depreciation-Machinery 5,625 2,250
Accumulated depreciation-Building 13,500 9,000
Accounts Payable 35,000 24,750
Accrued Payable 3,375 2,625
Long term Notes payable 21,000 31,000
Common stock, no-par 150,000 125,000
Retained Earnings 39,000 42,625
269,750 238,750
Additional data (ignoring taxes):
1. Net income for the year was Rs.42,500.
2. Cash dividends declared and paid during the year were
Rs.21,125.
3. A 20% stock dividend was declared during the year. Rs.25,000 of
retained earnings was capitalized.
4. Investments that cost Rs.25,000 were sold during the year for
Rs.28,750.
5. Machinery that cost Rs.3,750, on which Rs.750 of depreciation
had accumulated, was sold for
Rs.2,200.
Lever Brothers
Income Statement
For the year ended 2018
Rs.
Sales Revenue 540,000
Less: Cost of goods sold 380,000
Gross margin 160,000
Less: Operating expenses (includes Rs.8,625 depreciation and
Rs.5,400 bad debts) 120,450
Income from operations 39,550
Other: Gain on sale of investment 3,750
Loss on sale of machinery (800) 2,950
Net Income 42,500
Instructions
(a) Compute net cash flow from operating activities using the
direct method. 10-Marks
(b) Prepare a statement of cash flows using the indirect method.
10-Marks