QUESTION 2 15 MARKS

Following are extracts from the accounting records of Union Ltd at 30 June 2020:

Union Ltd		2019	2020
		($000)	($000)
Items from balance sheet as at 30 June 2020
Assets
Cash	550		655
Account receivable	220		300
Allowance for doubtful debts	(15)		(30)
Inventory	450		500
Land	200		200
Plant and equip.	250		300
Accumulated depreciation - plant and equip.	(120)		(130)
Total Assets	1,535		1,795
Liabilities
Accounts payable	300		320
Interest payable	35		20
Borrowings	330		400
Equity
Share capital	450		450
Retained earnings	420		605
Total liabilities and equity	1,535		1,795
Items from income statement for the period ending 30 June 2020
($000)
Sales (all on credit)			500
Cost of sales			(150)
Doubtful debt expenses			(80)
Wages and salaries			(10)
Depreciation expense			(50)
Interest expense			(25)
Net Profit			185

Other information:

• Plant with a carrying value of $nil (cost of $40,000; accumulated depreciation of $40,000) is scrapped during the year.

• Assume there are no income taxes and dividend payments during the year.

• Wages and salaries are paid by cash.

REQUIRED

Prepare a cash flow statement for Union Ltd for the year ending 30 June 2020 using the direct method. Notes are not required.