Question 4 (14 marks)

Farmiga Inc. Balance Sheet December 31

2014 2013

Assets Cash $120,600 $176,400

Accounts Receivable 181,800 135,000

Inventory 369,000 257,400

Long-term Debt Investment 176,400 0

Property Plant and Equipment 1,008,000 828,000

Less: Accumulated Depreciation (292,500) (252,000)

$1,563,300 $1,144,800

Liabilities & Shareholder's Equity

Accounts Payable $157,500 $117,000

Dividends Payable 10,800 0

Income Tax Payable 25,200 28,800

Long-term Notes Payable 81,000 0

Common Shares 1,170,000 945,000

Retained Earnings 118,800 54,000

$1,563,300 $1,144,800

Farmiga Inc. Income Statement Year Ended December 31, 2014

Sales $1,137,600

Cost of Goods Sold 772,200

Gross profit 365,400

Operating expenses $265,500

Loss on Sale of Equipment 3,600 269,100

Profit from Operations 96,300

Interest expense 5,400

Interest revenue 9,900 4,500

Profit before Income Tax 100,800

Income tax expense 25,200 Profit $75,600.

Question 4 (continued) Required: Prepare a complete Statement of Cash Flow using the Indirect method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Information:

1 Cash Dividends of $10,800 were declared on December 31, 2014, payable January 15, 2015

2 A long term debt investment was acquired for cash at a cost of $175,500

3 Depreciation expense is included in the operating expenses.

4 The company issued 22,500 common shares for cash on March 31, 2014. The fair value of the shares were $10 per share. The proceeds were used to purchase additional equipment

5 Equipment that originally cost $45,000 was sold during the year for cash. The equipment had a net book value of $16,200 at the time of sale.

6 The company issued a note payable for $90,000 and repaid $9,000 of it by year end.

7 Accounts Payable is used for Merchandise purchases, Accounts Receivable relate to Sales

8 65,625 shares were outstanding Dec. 31, 2013. 15,625 more common shares were issued Aug 31/2014

9 Westerner Inc. is a private company reporting under ASPE.