Question

In: Accounting

QUESTION 4                                         &nbs

QUESTION 4                                                                                                           

Lesedi Company (Pty) Ltd.’s balance sheets for the last two years are provided below

Balance Sheet

2019

2018

Cash

R 82 000

R 40 000

Accounts Receivable

180 000

150 000

Inventory

170 000

200 000

Equipment

200 000

140 000

Accum. Depreciation

(72 000)

(60 000)

Total Assets

R560 000

R470 000

Accounts Payable

R100 000

R 80 000

Long-term Payables

100 000

50 000

Ordinary Shares

250 000

250 000

Retained Earnings

110 000

    90 000

Total Liabilities &

     Shareholders’ Equity

R560 000

R470 000

The company’s income statement for 2019 is provided below:

Income Statement

2019

Sales

R345 000

Expenses:

Cost of Goods Sold

R120 000

             Operating Expenses

58 000

Depreciation Expense

20 000

Interest Expense

2 000

   200 000

Operating Income

145 000

Gain on Sale--

Equipment*

5 000

Income before Taxes

150 000

Tax Expense

    30 000

Net Income/profit

R120 000

*The company sold equipment for R57 000 that had a cost of R60 000

Required:

Prepare the company’s Statement of Cash flow for 2019. Use the direct method for calculating the cash flows from operating activities.                                            (15)

Solutions

Expert Solution

LESEDI COMPANY(Pty) Ltd

CASH FLOW STATEMENT FOR THE YEAR 2019

Particulars

Amount

Amount

I. Cash flow from operating activities

Collection from Sales

315,000

Payment for Purchases

(70,000)

Operating Expense

(58,000)

Income Tax Expenses

(30,000)

Cash generated from operating activities

157,000

II. Cash flow from investing activities

Sale of Equipment

57,000

Purchase of Equipment

(120,000)

Cash used in Investing activities

(63,000)

III. Cash flow from financing actvities

Borrowig of long-term payables

50,000

Interest on borrowings

(2,000)

Dividend paid to shareholders

(100,000)

Cash used in financing activities

(52,000)

Net Cash Inflow

42,000

Add: Opening Cash and cash equivalents

40,000

Closing cash and cash equivalents

82,000

Working Notes

1. Collection from Sales = Sales revenue- Increase in Account Receivable

                                        = 345000-30000 = 315000

2. Payment for Purchases = Purchases- Increase in Accounts Payable

                                          = (120000-200000+170000)- 20000 = 70000

3. Equipment purchase value= Closing cost-(Opening cost-cost of asset sold)

= 200000-(140000-60000) =120000


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