4G 13:45 AM ll ill (73) Q# 4. (40 Marks) Randell Limited is a fashion trading company located in Hong Kong. The firm prepare financial statements on a monthly basis. The following are the latest financial statements Rondell Limited Income Statement For the Year ended December 31, 2018 Rs. 818,000 Rs. Sales Cost of Goods Sold 438.000 380.000 28,000 298,000 54.000 Gross Profit Less: Depreciation expense Selling, general and other admin expenses Income from operations Loss on equipment sale Income before income taxes Income tax expense Net Income 6,000 48.000 24,000 24,000 Randell Limited Page 2 of 4 Comparative Statement of Financial Position As on December 31 2018 (Rs.) 115,000 5,000 110,000 53,000 30,000 2017 (Rs.) 31,000 49,000 96,000 Cash Term Deposit (60-days) Account Receivable Inventory Prepaid expenses Land Building Less: Ace. Depreciation Equipment Less: Acc. Depreciation Total Assets 37,000 40,000 57,600 95,600 166,000 184,000 200,000 (34,000) 116,000 (30,000) 200,000 (16,000 160,000 (40,000) 86,000 120,000 614,600 660,600 75,300 Accounts Payable Bonds Payable Common Stock Retained Earning Total Liabilities and Equity 49,000 200,000 200,000 165,600 400,000 185,300 660.600 614,600 Randell has recently hired an accounting trainee, Patrick Ko, who has prepared the statement of cash flow based on the financial statements above, along with the following information: All property, plant and equipment acquired during the year are paid in cash. During the year, equipment was sold for Rs. 18,000 with a cost and net book value being Rs.44,000 and R$ 24,000 respectively. Randell has converted Rs.200,000 of its bonds into common stock during the year. The firm has declared and paid a cash dividend in 2018. Randell Limited 13:45 Am 11.111 73 flow based on the financial conting trainee, Patrick Ko, who has prepared the statement of cash an flow based on the financial statements above, along with the following information: All property, plant and equipment acquired during the year are paid in cash. During the year, equipment was sold for Rs. 18.000 with a cost and net book value being Rs.44.000 and Rs 24,000 respectively Randell has converted Rs.200,000 of its bonds into common stock during the year. The firm has declared and paid a cash dividend in 2018. Randell Limited Page 3 of 4 Statement of Cash Flows 26,300 26,300 19,700 14,000 10.000 Cash Flows from Financing Activities Increase in account payable Net cash provided by financing activities Cash Flows from Operating Activities Increase in retained earnings Adjustments to net cash provided by operating activities: Increase in accounts receivable Decrease in prepaid expenses Sale of equipment Net cash provided by operating activities Cash Flows from Investing Activities Purchase of land Loss on sale of equipment Net cash provided by investing activities Net increase in cash Cash at beginning of period Cash at end of period (18.000) 6.000 25,700 38,000 (6,000) 32.000 84,000 31,000 115,000 Required: You are required to list the mistakes and suggest corrections on the statement of cash flows prepared by Patrick Show working on your computations if any. The End The End Page 4 of 4
