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: 1. Plant and equipment which had originally cost $50,000 and had been depreciated by $10,000, was sold during the year for $47,500 2. The company pays income tax in one payment. 3. The land was revalued upwards during the year by $15,000. 4. During the year, a dividend of $22,500 was paid. Yellow Submarine Ltd classifies dividends paid as a financing activity. 5. 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?