Question

QUESTION 2

1. Noor Corp.'s statements of financial position at December 31, 2020 and 2019 and information relating to 2020 activities are presented below:

       December 31, ___

      2020                       2019

   Assets

            Cash.............................................................................................    $ 110,000               $ 50,000

            Temporary investments.................................................................          150,000                            —

            Accounts receivable (net)..............................................................          255,000                255,000

            Inventory......................................................................................       345,000                300,000

            Long-term investments..................................................................       100,000                150,000

            Property, plant and equipment......................................................      850,000                500,000

            Accumulated depreciation............................................................       (225,000)             (225,000)

            Goodwill.......................................................................................             45,000                   50,000

                      Total assets............................................................................   $ 1,630,000         $ 1,080,000

   Liabilities and Shareholders' Equity

            Accounts payable..........................................................................       $ 415,000             $ 360,000

            Long-term note payable................................................................          145,000                            —

            Common shares............................................................................          600,000                475,000

            Retained earnings.........................................................................          470,000                245,000

                      Total liabilities and shareholders' equity................................   $ 1,630,000         $ 1,080,000

   Other information relating to 2020 activities:

   1.      Net income was $ 375,000.

   2.      Cash dividends of $ 150,000 were declared and paid.

   3.      Equipment costing $ 250,000, with a book value of $ 80,000, was sold for $ 90,000.

   4.      A long-term investment was sold for $ 80,000. There were no other transactions affecting long-term investments.

   5.      5,000 common shares were issued for $ 25 a share.

   6.      Temporary investments consist of treasury bills maturing on June 30, 2020

   Required

   A. Calculate the cash used in investing activities in 2020

   B. Calculate the cash provided by financing activities in 2020

Answer 1

A.

Cash flow from Investing Activities:
	Purchase of equipment		(600,000.00)
	Sale of equipment		90,000.00
	Sale of investment		80,000.00
	Purchase of land		-
	Net cash used in Investing Activities			(430,000.00)

B.

Cash flow from Finacing Activities:		-
	Proceeds from issuance of share capital		125,000.00
	Payment of Dividend		(150,000.00)
	Proceeds from long term note payable		145,000.00
	Net cash from Financing Activities			120,000.00

Working note:

Equipment
Particulars	Amount	Particulars	Amount
To Balance bd	500,000.00	By cash sale equpmnt
To Profit on sale	10,000.00	By Sales	90,000.00
Cash (Purchase)	600,000.00	Loss on sale
		Accumulated depreciation	170,000.00
		By Balance cd	850,000.00
	1,110,000.00		1,110,000.00

Accumulated depreciation
Particulars	Amount	Particulars	Amount
To Equipment	170,000.00	By Balance bd	225,000.00
		By Depreciation	170,000.00
To Balance cd	225,000.00
	395,000.00		395,000.00

Retained Earnings
Particulars	Amount	Particulars	Amount
Dividend	150,000.00	By Balance bd	245,000.00
	-	Net Income	375,000.00
To balance cd	470,000.00
	620,000.00		620,000.00

Dividend Payable
Particulars	Amount	Particulars	Amount
To Cash BF	150,000.00	By Balance bd	-
To balance cd	-	Retained Earnings	150,000.00
	150,000.00		150,000.00

Common Stock
Particulars	Amount	Particulars	Amount
To cash b/f		By Balance bd	475,000.00
To balance cd	600,000.00	By Cash	125,000.00
	600,000.00		600,000.00

Long term Investment Account
Particulars	Amount	Particulars	Amount
Balance bd	150,000.00	By cash	80,000.00
to profit on sale	30,000.00
		By Balance c/d	100,000.00
	180,000.00		180,000.00

Cash flow statement of Noor Corp's
For Current Years Ended December 31 2020
Particulars		Amount	Amount
Cash flow from Operating Activities:
	Net Income		375,000.00
	Add: Depreciation		170,000.00
	Add: Writing off Goodwill		5,000.00
	Less: Pofit on sale of equipment		(10,000.00)
	Less: Profit on sale of investment		(30,000.00)
	Operating profit before working capital changes	510,000.00
	Add: increase in Accounts payable		55,000.00
	Less: Increase in investment		(150,000.00)
	Less: Increase in inventory		(45,000.00)
	Cash generated from operations before tax and extra ordinary items	370,000.00
	Less Income Tax		-
	Net cash from Operating Activities			370,000.00
Cash flow from Investing Activities:
	Purchase of equipment		(600,000.00)
	Sale of equipment		90,000.00
	Sale of investment		80,000.00
	Purchase of land		-
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