Exercise 18.9

The financial statements for the business of Trinhs Nail Supplies for the past two years are presented below.

Additional information

1. All purchases and sales of inventories are on credit. All purchases of office supplies are for cash.
2. The bank overdraft is considered to be part of the entitys cash management function.
3. During the year ended 30 June 2017, the owner, Trinh, withdrew $12 800 in cash for personal use.
4. The entity sold some fixtures for $1200 cash during the current year. These fixtures initially cost $4200 and had been written down to a carrying amount at the date of sale of $2000.
5. Depreciation of fixtures has been included in other expenses for the year ended 30 June 2020. All remaining other expenses were paid in cash.

Required

(a) Prepare the statement of cash flows for Trinhs Nail Supplies for the year ended 30 June 2020, using the direct method.

(b) Comment on the cash flow position of the entity as shown in the statement of cash flows.

TRINH'S NAIL SUPPLIES Comparative Income Statements for the year ended 30 June 2019 $400 000 350 000 50 000 1000 2020 $500 000 458 000 Salos Cost of sales GROSS PROFIT Interest Income Loss on sale of fixtures 42 000 2 000 800 43 200 11 000 29000 40 000 51000 10000 29 000 39 000 $ 12000 Office supplies used Other expenses PROFIT $ 3200 2020 TRINH'S NAIL SUPPLIES Comparative Statements of Financial Position as at 30 June 2019 ASSETS Cash at bank 4400 Accounts receivable 42000 Inventory 80000 Office supplies 2000 Freehold property 60 000 Fixtures 40.000 Accumulated depreciation foxtures (16000) Investments 6000 $218 400 LIABILITIES AND EQUITY Bank overdraft Accounts payable 26000 TH MT 192 400 $18.400 $ 60000 40 000 5000 80000 46000 (20 200) 16000 $ 226 800 4000 10000 182 800 $ 228 800