2108AFE Financial Accounting Assessable Workshop Question

Topic 9 Statement of Cash Flows

Question 1

Yellow Submarine Ltds Balance Sheets at the end of June 2016 and 2017 were as follows:

Yellow Submarine Ltd. Balance Sheets as at 30 June
	2017	2016
ASSETS
Current Assets
Accounts Receivable	200,000	107,500
Allowance for Doubtful Debts	(20,000)	(10,000)
Inventory	305,500	182,500
	485,500	280,000
Non-Current Assets
Land	25,000	10,000
Buildings	60,000	60,000
Accumulated Depreciation buildings	(35,000)	(30,000)
Plant & Equipment	300,000	207,000
Accumulated Depreciation plant & equipment	(55,500)	(27,000)
	294,500	220,000
TOTAL ASSETS	780,000	500,000
LIABILITIES AND OWNERS EQUITY
Current Liabilities
Bank Overdraft	167,950	58,800
Accounts Payable	29,300	36,200
Current Tax Payable	15,000	6,000
	212,250	101,000
Owners Equity
Share Capital	385,000	300,000
Asset Revaluation Reserve	15,000	-
General Reserve	85,000	50,000
Retained Profits	82,750	49,000
Total Equity	567,750	399,000
TOTAL LIABILITIES AND OWNERS EQUITY	780,000	500,000

The companys Income Statements for the year ended 30 June 2017 and general ledger revealed the following information:

	$	$
Net Sales		550,000
Cost of Goods sold		277,000
Gross Profit		273,000
Proceeds from sale of plant & equipment		47,500
Gross profit		320,500
Expenses: Carrying amount of equipment sold Salaries and wages expense	40,000 60,250
Depreciation expense - buildings	5,000
Depreciation expense - plant & equipment	38,500
Electricity expense	3,000
Bad debts expense	30,000	176,750
Net Profit before tax		143,750
Income tax expense		52,500
Net Profit after tax		91,250

Additional Information:

Plant and equipment which had originally cost $50,000 and had been depreciated by $10,000, was sold during the year for $47,500

The company pays income tax in one payment.

The land was revalued upwards during the year by $15,000.

During the year, a dividend of $22,500 was paid. Yellow Submarine Ltd classifies dividends paid as a financing activity.

All purchases and sales were made on credit.

Required:

Prepare a Cash Flow Statement for the year ended 30 June 2017, in accordance with AASB 107 Cash Flow Statements. Show workings.

FOR HOMEWORK SUBMISSION ONLY ONE METHOD REQUIRED (T account OR Equation)

OPERATING ACTIVITIES

Receipts from Customers

Account Reconstruction Method

Provision for Doubtful Debts

Accounts Receivables

OR Formula Method

Cash receipts from customers =

Payments to Suppliers and Employees

Payments to Suppliers for Inventory Purchases

Inventories

Accounts Payable

OR

Payments to suppliers for purchases of inventory =

Cash Paid to Suppliers of Services

Cash paid to suppliers of services =

TOTAL payments to Suppliers and Employees

Payments for Income Tax (required as a separate line item)

Current Income Tax (using Current Tax Payable account) =

INVESTING ACTIVITIES

Plant and Equipment

Accumulated Depreciation - Plant and Equipment (NCA)

Plant and Equipment (NCA)

Yellow Submarine Ltd Statement of Cash Flows For the year ended 30 June 2017
Cash flows from operating activities	$
Net cash from/used in operating activities
Cash flows from investing activities
Net cash from/used in investing activities
Cash flows from financing activities
Net cash from/used in financing activities
Net increase/decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Question 2 - Theory

An entity may report significant profits over a number of successive years and still experience negative net cash flows from its operating activities. How can this happen?