(a) Prepare a Statement of Cash Flows for the year ended 30 June 2020 using the direct method, ignoring GST. (10 marks)

Show all workings on the Workings page.

(b) Using the relevant information from the question above, identify two (2) specific items (including their values) which causes a difference between Net Profit and Net Cash from Operating Activities and analyse why it causes a difference. (2 marks)

The following financial statements relate to Clarke Ltd for the financial year ended 30 June 2020.

Balance Sheet as at 30 June

	2020	2019
ASSETS	$	$
Current Assets
Cash	212,500	176,000
Accounts Receivable	100,000	200,000
Allowance for Doubtful Debts	(10,000)	(5,000)
Inventory	45,000	42,000
Prepaid rent	5,000	2,500
Total current assets	352,000	415,000
Non-Current Assets
Land	550,000	500,000
Equipment	900,000	800,000
Accumulated Depreciation - Equipment	(650,000)	(560,000)
Total non-current assets	800,000	740,000
TOTAL ASSETS	1,152,500	1,155,500
LIABILITIES & EQUITY
Liabilities
Accounts Payable	45,000	35,000
Wages Payable	30,000	15,000
Income Tax Payable	28,000	24,000
Loan Payable	--	400,000
Total liabilities	103,000	474,000
Owner's Equity
Share Capital	750,000	500,000
Retained Profits	249,500	181,500
Revaluation Surplus	50,000	0
Total Equity	1,049,500	681,500
TOTAL LIABILITIES AND EQUITY	1,152,500	1,155,500

Clarke Limited's Income Statement for the year ended June 2020

Revenue	$
Net Sales	750,000
Cost of Sales	225,000
Gross Profit	525,000
Expenses
Wage expense	300,000
Depreciation Expense - Equipment	90,000
Bad Debt Expense	10,000
Rent expense	4,000
Interest expense	3,000
Total expenses	407,000
Net Profit Before Tax	118,000
Income Tax Expense	35,400
Net Profit After Tax	82,600

Additional information:

Interest expense is classified as an operating cash flow.

The company paid dividends in 2020.

Land was revalued during the 2020 financial year.