Question

A comparative statement of financial position for Ayayai Corporation follows:

AYAYAI CORPORATION Statement of Financial Position
		December 31
Assets		2020			2019
Cash		$48,100			$21,460
Accounts receivable		64,380			43,660
Inventory		98,420			59,940
FV-OCI investments in shares		46,620			62,160
Land		48,100			76,220
Equipment		288,600			318,200
Accumulated depreciation—equipment		(86,580	)		(63,640	)
Goodwill		91,760			128,020
Total		$599,400			$646,020
Liabilities and Shareholders’ Equity
Accounts payable		$8,880			$37,740
Dividends payable		11,100			23,680
Notes payable		162,800			247,900
Common shares		196,100			92,500
Retained earnings		213,120			210,160
Accumulated other comprehensive income		7,400			34,040
Total		$599,400			$646,020

Additional information:

1.		Net income for the fiscal year ending December 31, 2020, was $14,060.
2.		In March 2020, a plot of land was purchased for future construction of a plant site. In November 2020, a different plot of land with original cost of $63,640 was sold for proceeds of $70,300.
3.		In April 2020, notes payable amounting to $103,600 were retired through the issuance of common shares. In December 2020, notes payable amounting to $18,500 were issued for cash.
4.		FV-OCI investments were purchased in July 2020 for a cost of $11,100. By December 31, 2020, the fair value of Ayayai’s portfolio of FV—OCI investments decreased to $46,620. No FV—OCI investments were sold in the year.
5.		On December 31, 2020, equipment with an original cost of $29,600 and accumulated depreciation to date of $8,880 was sold for proceeds of $15,540. No equipment was purchased in the year.
6.		Dividends on common shares of $23,680 and $11,100 were declared in December 2019 and December 2020, respectively. The 2019 dividend was paid in January 2020 and the 2020 dividend was paid in January 2021. Dividends paid are treated as financing activities.
7.		A loss on impairment was recorded in the year to reflect a decrease in the recoverable amount of goodwill. No goodwill was purchased or sold in the year.

(a)

Prepare a statement of cash flows using the indirect method for cash flows from operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Statement of Cash Flow for year ended December 31, 2020
Particulars	Amount in $
Cash flows from operating activities
Net Income	14,060
Adjustments to arrive cash flow from operating activities:
Depreciation expense ( 86,580 - ( 63,640 - 8,880 ) )	31,820
Loss on sale of Equipment ( 29,600 - 8,880 - 15,540 )	5,180
Loss on goodwill impairment (128,020 - 91,760 )	36,260
Gain on sale of plot of land ( 63,640 - 70,300 )	-6,660
Increase in accounts receivables ( 64,380 - 43,660 )	-20,720
Increase in Inventory ( 98,420 - 59,940 )	-38,480
Decrease in accounts payable ( 8,880 - 37,740 )	-28,860
Net Cash flow from( used in) operating activities	-7,400
Cash flows from investing activities
Sale of Equipment	15,540
Purchase of FV-OCI Investments	-11,100
Purchase of plot of land { 48,100 - (76,220 - 63,640 ) }	-35,520
Proceeds from sale of plot of land	70,300
Net Cash flow from Investing activities	39,220
Cash flows from financing activities
Issuance of Note payable for cash	18,500
Payment of cash dividends	-23,680
Net Cash flows from (used in ) financing activities	-5,180
Net increase(decrease) in cash and cash equivalents (A)	26,640
Cash and cash equivalents at beginning of period (B)	21,460
Cash and cash equivalents at end of period =A+B	48,100
	-