Question

The Statements of Financial Position for Lexington Limited as at 30 June 2019 and 30 June 2020 are provided below:

Lexington Ltd Statement of Financial Position as at 30 June
	2020		2019
Assets	$		$
Cash at bank	64,580		38,400
Accounts Receivable	82,800		35,000
Inventory	112,500		102,850
Prepaid Advertising	14,400		14,000
Machinery	310,000		282,500
Less: Accumulated Depreciation	(50,000)		(52,000)
Total Assets	$534,280		$420,750
Liabilities
Accounts Payable	157,000		59,300
Dividends payable	15,000		-
Wages payable	20,700		25,000
Loan	125,000		130,000
Total Liabilities	$317,700		$214,300
Shareholders' Equity
Share Capital	126,000		101,000
Retained Earnings	90,580		105,450
Total Shareholders' Equity	$216,580		$206,450
Total Liabilities and Shareholders' Equity	$534,280		$420,750

Question One continued on the next page

QUESTION ONE (CONTINUED)

The Statement of Financial Performance for Lexington Limited for the financial year ended 30 June 2020 is provided below:

Lexington Ltd Statement of Financial Performance for the year ended 30 June 2020 $
Sales		272,000
Less:
Cost of sales	145,460
Advertising Expense	15,000
Wages Expense	20,000
Other Operating Expenses	73,910
Loss on sale of Machine	7,500
Total Expenses		261,870
Profit		$10,130

Additional Information:

1. An interim dividend was declared and paid. A final dividend of $15,000 was declared.
2. New machinery costing $85,000 was purchased for cash during the year.
3. A machine having an original cost of $57,500 was sold for cash during the year. Accumulated depreciation of the machine sold was $48,500 at the point of sale.
4. Other Operating Expenses include depreciation expense of $46,500.
5. Additional shares were issued for cash during the year.
6. All sales and purchases are on credit throughout the year ending 30 June 2020.
7. Accounts payable reflects inventory purchases on credit from suppliers.

REQUIRED:

1. Prepare a fully classified Statement of Cash Flows for Lexington Ltd for the year ended 30 June 2020 using the direct method. Show all workings.

      (b) Compare and contrast the information provided from a Statement of Cash Flows as compared to information contained in the Statement of Financial Position and Statement of Financial Performance. (word limit 150).

Answer 1

1. Cash Flow Statement -

a. Dividend Paid = Retained Earnings Beginning + Net Income - Retained Earnings Ending

= $105,450 + $10,130 - $90,580

= $25,000

b. Sale of Machinery = Cost of Machinery - Accumulated Depreciation - Loss on Sale

= $57,500 - $48,500 - $7,500

= $1,500

2. Working Notes -

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