Question 2

ANSWER ALL QUESTIONS

Show all workings clearly as marks may be allocated for workings. SHOW WORKINGS SEPARATELY. DO NOT PLACE ANY WORKINGS IN BRACKETS ON THE EXTRACTS.

Pay attention to the years heading the columns of the comparative statement.

Place brackets around amounts listed as outflows, do not use minus signs.

Question #2 30 marks

Cantelupe Inc. has prepared the following comparative statement of financial position for 2015 and 2016:

2016 2015

Property, Plant and Equipment $1 260 000 $1 050 000

Accumulated depreciation (450 000) (375 000)

Patent 153 000 174 000

Prepaid expenses 18 000 27 000

Inventory 150 000 180 000

Receivables 159 000 117 000

Cash 297 000 153 000

$1 587 000 $1 326 000

Mortgage payable $ 525 000

Accounts payable 120 000

Accrued liabilities 600 000 $600 000

Share capital-Preference 129 000 66 000

Share premium-Preference 450 000

Share capital-Ordinary 153 000 168 000

Retained earnings 60 000 42 000

$1 587 000 $1 326 000

The Accumulated Depreciation account has been credited only for the depreciation expense for the period.

The Retained Earnings account has been charged for dividends of $183 000 and credited for the net income for the year.

The income statement for 2016 is as follows:

Sales $1 980 000

Cost of sales 1 089 000

Gross profit 891 000

Operating expenses 690 000

Net income $ 201 000

Required:

Prepare a Statement of Cash Flows Extract (Operating Activities) for Cantelupe Inc. for the year

ended December 31, 2016 using:

i) Direct Method

ii) Indirect Method