2 (35 marks) The following financial information was prepared by Tallman Ltd: Tallman Ltd Balance sheet as at 30 June 2020 2020 2019 $ $ Plant and equipment 158,670 143,500 Long-term investments 7,300 5,800 Long-term note receivable 165,970 149,300 Current assets Inventories 35,600 32,500 Accounts receivables 21,860 19,200 Prepaid expenses 1,475 795 Cash at bank 4,500 2,600 229,405 204,395 Total assets Equity Share capital 70,500 70,500 General reserves 21,000 15,000 Retained earnings 77,535 50,115 169,035 135,615 Non-current liabilities Bank loans (due 2024) 28,000 40,000 Current liabilities Accounts payables Other payables Interest payables Tax payables 18,680 16,180 2,360 1,980 830 760 10,500 9,860 229,405 204,395 Tallman Ltd Statement of profit or loss for the year ended 30 June 2020 Sales Cost of sales Gross profit $ 380,500 (253,000) 117,000 Administration expense Interest cost Selling expenses Profit before tax (note 1) Taxation Profit for the year The following additional information is available: (18,950) (3,540) (35,630) 69,380 (13,876) 55,504 1. Profit before tax is arrived at after charging/ (crediting): Depreciation of plant and equipment 25,460 Impairment loss on accounts receivables 1,890 Impairment loss on inventories 2,800 Loss on sale of office equipment 3,100 2. 3. Office equipment with a written down value of $18, 300 was sold during the year for $15,200 cash. There was no sale of other non-current assets and long-term investment during the year. The directors resolved to transfer $6,000 retained earnings to general reserves at 30 June 2020. There was no change in share capital during the year. 4. Dividends paid during the year were $22,084. 5. Assume all sales and purchases were made on credit terms. Required: a. Prepare a statement of cash flows for the year ended 30 June 2020, using the indirect method. (25 marks) b. Based on your workings in (a) above, comment on the cash flows of Tallman Ltd. (10 marks)