Question

Titiki Ltd. had the following comparative statement of financial position:

Titiki Ltd.
Comparative Statement of Financial Position
As at December 31

2020                     2019

Cash                                                                                     $20,500               $12,500
Accounts receivable 34,000                  25,500
Inventories 20,000                  30,000
Prepaid insurance 2,500                    2,000
Equipment 102,000                  90,000
Accumulated depreciation—equipment   (22,500)              (12,500)
Total assets   $156,500            $147,500
Accounts payable $23,000               $20,000
Wages payable 4,000                    2,000
Interest payable 2,000                    3,000
Income taxes payable 4,000                    5,000
Long-term note payable 30,000                  34,500
Common shares 65,000                  65,000
Retained earnings     28,500                  18,000
Total liabilities and shareholders’ equity   $156,500            $147,500

Additional information:
· Net income for the fiscal year was $13,500.
·  Equipment that cost $10,000 and was sold for a gain of $1,000 during 2020. The equipment’s accumulated depreciation was $7,000.

Required:
Prepare the statement of cash flows using the indirect format.

Answer 1

a) Cash flow statement : Indirect Method
Cash flows from operating activities:	Working	Amount $
Profit before tax	$         13,500.00
Adjustments:
Depreciation	$         17,000.00
Gain on sale of Equipment	$          (1,000.00)
Operating profit from before working capital changes	$         29,500.00
Accounts receivable (increase)/decrease	$          (8,500.00)
Inventory (increase)/decrease	$         10,000.00
Account payable (decrease)/increase	$            3,000.00
Prepaid expense (increase)/decrease	$             (500.00)
Income tax payable (decrease)/increase	$          (1,000.00)
Wage payable (decrease)/increase	$            2,000.00
Interest payable (decrease)/increase	$          (1,000.00)
Cash generation from operation	$         33,500.00
Income tax expense	$                        -
Net cash provided by operating activities		$         33,500.00
Cash flows from investing activities:
Net proceeds/(Purchase) of Equipment	$            4,000.00
Net proceeds/(Purchase) of Equipment	$        (22,000.00)
Net cash used in investing activities		$       (18,000.00)
Cash flows from financing activities:
Net proceeds/(Repayment))of Issue of Common stock	$                        -
Net proceeds/(Repayment))of Long term pay	$          (4,500.00)
Net proceeds/(Repayment))of Long term pay	$                        -
Dividend paid	$          (3,000.00)
Net cash provided by financing activities		$          (7,500.00)
Net increase in cash		$            8,000.00
Opening Cash balance, 2020		$          12,500.00
Closing Cash balance, 2020		$         20,500.00

	Ledger Working
Retained earning
				Opening balance	$        18,000.00
	Dividend paid	$          3,000.00		Net income	$        13,500.00
	Closing balance	$        28,500.00
		$        31,500.00			$        31,500.00

Equipment
	Opening balance	$        90,000.00
	Addition Plant assets	$        22,000.00		Sale of asset	$        10,000.00
				Closing balance	$     1,02,000.00
		$    1,12,000.00			$    1,12,000.00
Accumulated depreciation
				Opening balance	$        12,500.00
	Sale of asset	$          7,000.00		Depreciation	$        17,000.00
	Closing balance	$        22,500.00
		$        29,500.00			$        29,500.00
Sale of Equipment
	Equipment	$        10,000.00		Acc. Dep	$          7,000.00
	gain on sale	$          1,000.00
				Proceeds from sale	$          4,000.00
		$        11,000.00			$        11,000.00

· Please do upvote if you found the answer useful.
· Feel free reach in the comment section in case of any clarification or queries.