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QUESTION 2 Noor Corp.'s statements of financial position at December 31, 2020 and 2019 and information...

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

Solutions

Expert Solution

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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