Practical Question 3 - Statement of Cash Flows

Shown below is an extract from the comparative statements of financial position and statement of profit or loss of Hawkeye Ltd for the year ended 30 June 2021:

Hawkeye Ltd
Statement of Financial Position as at 30 June
	30-Jun-21	30-Jun-20
CURRENT ASSETS	$	$
Cash	5,000	6,000
Accounts Receivable	25,800	22,000
Allowance for Doubtful Debts	(2,600)	(2,200)
Inventories	78,400	75,000
Prepaid Expenses	1,200	2,400
	107,800	103,200
NON-CURRENT ASSETS
Deferred Tax Asset	200	800
Buildings - at cost	188,000	166,000
Accumulated depreciation- buildings	(34,000)	(24,000)
Plant - at cost	58,000	50,000
Accumulated depreciation- Plant	(20,000)	(17,000)
	192,200	175,800
TOTAL ASSETS	300,000	279,000
CURRENT LIABILITIES
Bank Overdraft	600	7,800
Accounts payable	12,500	15,000
Accrued Expenses	2,200	2,500
Interest Payable	2,600	2,200
Current tax liability	5,000	6,400
	22,900	33,900
NON- CURRENT LIABILITIES
Deferred Tax Liability	2,100	3,300
Bank Loan (Secured)	50,400	39,000
	52,500	42,300
TOTAL LIABILITIES	75,400	76,200
Share Capital	120,000	110,000
Retained Earnings	104,600	92,800
	224,600	202,800
TOTAL EQUITY AND LIABILITIES	300,000	279,000

Hawkeye Ltd
Statement of Profit or Loss
for the year ended 30 June 2021
Income	$	$
Sales	131,600
Gain on sale of equipment	2,400
Discount received	2,200
Total Income		136,200
Less: Expenses:
Cost of Sales	58,000
Depreciation Expense - plant	7,000
Depreciation Expense - buildings	10,000
Interest Expense	7,800
Bad Debts Expense	2,200
Discount Allowed	900
Administration and Distribution Expenses	20,000	105,900
Profit before Tax		30,300
Income Tax Expense		(9,000)
Profit for the year		21,300

Required:

1. Prepare the OPERATING activities section ONLY of the statement of cash flows for Hawkeye Ltd for the year ended 30 June 2021 using the direct method as required by AASB 107. (8 Marks)

2. Prepare a reconciliation of net cash flows arising from operating activities with profit. (7 marks)