The financial statements for the business of Trinhs Nail Supplies for the past two years are presented

Question:

The financial statements for the business of Trinh’s Nail Supplies for the past two years are presented below.

Additional information

1. All purchases and sales of inventories are on credit. All purchases of office supplies are for cash.

2. The bank overdraft is considered to be part of the entity’s cash management function.

3. During the year ended 30 June 2020, the owner, Trinh, withdrew $12 800 in cash for personal use.

4. The entity sold some fixtures for $1200 cash during the current year. These fixtures initially cost $4200 and had been written down to a carrying amount at the date of sale of $2000.

5. Depreciation of fixtures has been included in ‘other expenses’ for the year ended 30 June 2020. All remaining other expenses were paid in cash.

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Required

(a) Prepare the statement of cash flows for Trinh’s Nail Supplies for the year ended 30 June 2020, using the direct method.

(b) Comment on the cash flow position of the entity as shown in the statement of cash flows.

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Financial Accounting

ISBN: 9780730363217

10th Edition

Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie, Andreas Hellmann, Jodie Maxfield

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