Question

Question 5: Statement of Cash Flows

Below is the information relating to The Lewis Ltd for the year ended 30 June 2019

The Lewis Ltd

Comparative Statement of financial positions

as at 30 June 2019

                                                                                   2019                          2018

Assets

Cash                                                                         $47,500                        $23,625

Accounts receivable                                                   44,650                          29,250

Merchandise inventory                                              60,950                          51,325

Investments (long term)                                            42,300                          43,500

Property, plant, and equipment                               125,000                        102,500

Accumulated depreciation                                       (24,750)                            (20,000)

Total assets                                                         $296,650                       $230,200

Liabilities and Equity

Accounts payable                                                    $26,350                        $24,140

Unearned revenue                                                      1,250                               750

Accrued expenses                                                      6,050                            9,415

Debentures payable                                                   50,000                          35,000

Share capital                                                          125,000                        100,000

Retained earnings                                                     87,000                          60,895

Total liabilities and equity                                  $295,650                      $230,200

The Lewis Ltd

Statement of comprehensive income

for the year ended 30 June 2019

Sales                                                                                                            $150,000

Gain on sale of equipment                                                                               4,375

                                                                                                                     154,375

Less:

Cost of sales                                                              49,730                                     

Operating expenses (including depreciation

of $1,200 p.a.)                                                              8,535

Depreciation expense                                              $24,850

Interest expense                                                          2,720                          84,635

Income before income taxes                                                                           69,740

Income tax expense                                                                                          3,635

Profit after income tax                                                                                  $ 66,105

The following additional data were provided:

1. New equipment and machinery were purchased for cash during the year.
2. Investments were sold at cost.
3. Equipment costing $23,500 was sold for $7,775.
4. Accounts payable pertain to merchandise inventory creditors.

Required:

Prepare a Statement of cash flows for The Lewis Ltd for the year ended 30 June 2019 using the direct method.

Answer 1

Cash Flow Statement
Direct Method
Cash flow from Operating Activities
Cash Collected from Customers	$       135,100		=150000+29250-44650+1250-750
Cash paid to Suppliers	$        (57,145)		=-(49730+24140-26350+60950-51325)
Cash paid for Operating Expenses	$        (10,700)		=-(8535-1200+9415-6050)
Cash paid for interest	$          (2,720)
Cash paid for income tax	$          (3,635)
Net Cash from operating activities		$          60,900
Cash flow from Investing Activities
Sale of Investment	$            1,200		=43500-42300
Sale of Equipment	$            7,775
Purchase of Equipment	$        (46,000)		=102500-23500-125000
Net Cash used in investing activities		$        (37,025)
Cash flow from Financing Activities
Issue of Debentures	$         15,000		=50000-35000
Issue of Share Capital	$         25,000		=125000-100000
Payment of cash dividends	$        (40,000)		=-(60895+66105-87000)
Net Cash used in financing activities		$                   -
Net Increase in cash		$          23,875
Beginning Balance of Cash		$           23,625
Ending Balance of Cash		$           47,500