In: Accounting
Honeymoon Haven Ltd is due to commence preparation of the Cash Flow Statement at the end of 2010. The accountant has called in sick and the statement needs to be prepared by the end of the day. Consequently you, as managing director of the company are now required to complete this task, and have been given the following data:
Summarised Balance Sheet as at 31 December 2010 |
2010 |
2009 |
Cash |
106,800 |
168,210 |
Accounts Receivable |
138,840 |
133,500 |
Inventory |
213,600 |
202,920 |
Property, plant & equipment (net) |
341,760 |
357,780 |
Total Assets |
801,000 |
862,410 |
Accounts Payable |
128,160 |
144,180 |
Wages Payable |
2,670 |
8,010 |
Mortgage Payable |
186,900 |
229,620 |
Share Capital |
347,100 |
347,100 |
Retained Profits |
136,170 |
133,500 |
Total Liabilities and Owners’ Equity |
801,000 |
862,410 |
Summarised Income Statement for the year ended 31 December 2010 |
2010 |
Sales |
480,600 |
Cost of goods sold |
373,800 |
Expenses (including wages but not depreciation) |
53,400 |
Depreciation |
32,040 |
Net Profit |
21,360 |
Other information was provided as follows:
Land was sold at cost price of $53,400
Equipment was sold during the year at its written down value of $80,100
Dividends of $18,690 were paid during the year
Repayments totalling $42,720 were made on the mortgage payable during the year
Machinery costing $149,520 was purchased for cash
Required:
Prepare the Statement of Cash Flows using the Direct Method. (Refer to ILT report page 23 for layout)
Reconcile net profit to the net cash flow from operating activities. (Refer to ILT report page 37 for layout)
Cash flows from operating activities | ||
Cash receipts from customers | 475260 | |
Cash paid to suppliers | (389820) | |
Cash paid to employees | (58740) | |
Cash generated from operations | 26700 | |
Net cash from operating activities | 26700 | |
Cash flows from investing activities | ||
Purchase of property, plant, and equipment | (160200) | |
Proceeds from sale of equipment | 133500 | |
Net cash used in investing activities | (16020) | |
Cash flows from financing activities | ||
Proceeds from issuance of common stock | ||
Proceeds from issuance of long-term debt | ||
Principal payments under capital lease obligation | (42720) | |
Dividends paid | (18690) | |
Net cash used in financing activities | (61410) | |
Net increase in cash and cash equivalents | (61410) | |
Cash and cash equivalents at beginning of period | 168210 | |
Cash and cash equivalents at end of period | 106800 |
Reconciliation of net income to net cash provided by operating activities:
Net income | 2670 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 32040 | |
Provision for losses on accounts receivable | ||
Gain on sale of equipment | ||
Increase in interest and income taxes payable | ||
Increase in deferred taxes | ||
Increase in other liabilities | 18,000 | |
Total adjustments | 125,000 | |
Net cash provided by operating activities | $2,790,000 |