Question

The Income Statement and general ledger for the year ended 30th June 2019 reflected the following: PERFORMANCE DETAILS Sales 3,030,053 Less: sales returns (59,413) Net sales 2,970,640 Cost of goods sold 1,928,360 General expenses (All expenses EXCLUDING depreciation, bad debts written off & Income tax expense) 606,482 Income tax expense 97,860 Bad debts written off 2,840 Depreciation expense 109,624 Profit after tax $225,474 Additional information: 1. A fully depreciated machine with a cost of $14,200 was scrapped during the year. No proceeds were received when it was scrapped. 2. New equipment was purchased for cash during the year. 3. No new debentures were issued during the current year. 4. As at 1st July 2018, Egoly had 284,000 shares issued, at an issue price of $3 per share. During the current year, Egoly issued an additional 213,000 fully paid shares at an issue price of $3 per share. 5. A cash dividend of 40c per share was declared and paid during the year on all issued shares including those issued during the year. 6. Bills payable are used by Egoly as part of their longer-term cash management and are repayable within five years. REQUIRED: 1. Prepare a cash flow statement for Egoly Ltd using the DIRECT method for the year ended 30th June 2019. [18 Marks] 2. Wayne Deng is reviewing the statement of cash flows for his technology business. The statement has been provided by his accountant. He is concerned that the statement shows net cash outflows for investing activities. Discuss if Wayne should be worried by this. [3 marks].

Answer 1