Question B4 The following data are extracted from the financial statements of Lala Company Income Statement 2020 Profit $24,200 Gain Loss on sale of machine Depreciation expense 13,500 Amortization expense of patent 9,000 Statement of Financial Position 30 June 2020 30 June 2019 Cash $310,000 Accounts receivable 137,200 119,700 Inventory 353,200 400,000 Interest payable 39,100 51,200 Accounts payable 218,100 185,800 Additional Information (1) Made a loan of $30,000 to the ABC Company (2) Repaid a 3 year loan of $100,000 to Hang Seng Bank (3) Sold the old machine at cash of $122,500 (the cost of the machine is $175,500 and the accumulated depreciation at disposal was $55,000) (4) Purchased a new machine for cash at $300,000 (5) Paid cash dividend of $0 15 per share for the 220,000 ordinary shares issued and outstanding Required (a) Prepare the statement of cash flows for the year ended 30 June 2020 using the indirect method for LaLa Company (12 marks) (b) In preparing the statement of cash flows under indirect method, state how to deal with a gain on sale of property, plant and equipment Give one reason to support your answer (2 marks) (c) Which section of business activities in the statement of cash flow is least likely to show positive net cash flows in a successful and growing business (1 mark)

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Posted on Sep 29, 2024

Question B4 The following data are extracted from the financial statements of Lala Company:

Income Statement:	2020

Profit	$24,200
Gain/Loss on sale of machine	?
Depreciation expense	13,500
Amortization expense of patent	9,000

Statement of Financial Position:	30 June 2020	30 June 2019

Cash	?	$310,000
Accounts receivable	137,200	119,700
Inventory	353,200	400,000
Interest payable	39,100	51,200
Accounts payable	218,100	185,800

Additional Information:

(1) Made a loan of $30,000 to the ABC Company.
(2) Repaid a 3-year loan of $100,000 to Hang Seng Bank.
(3) Sold the old machine at cash of $122,500 (the cost of the machine is $175,500 and the accumulated depreciation at disposal was $55,000).
(4) Purchased a new machine for cash at $300,000.
(5) Paid cash dividend of $0.15 per share for the 220,000 ordinary shares issued and outstanding.

Required:

(a) Prepare the statement of cash flows for the year ended 30 June 2020 using the indirect method for LaLa Company. (12 marks)
(b) In preparing the statement of cash flows under indirect method, state how to deal with a gain on sale of property, plant and equipment? Give one reason to support your answer. (2 marks)
(c) Which section of business activities in the statement of cash flow is least likely to show positive net cash flows in a successful and growing business? (1 mark)