QUESTION TWO The Statements of Financial Position for Belmore Ltd (a trading entity) as at 30 June 2016 and 30 June 2015 are provided below: 2016 2015 $ $ 82,22462,760 129, 144 87,096 35,310 47,055 114,195 55,500 250,642 163,458 100,250 69,750 (39,233) (43,583) 672,532 442,036 Assets Cash at bank Accounts receivable Prepaid Insurance Inventory Land Motor vehicles - At cost Less: Accumulated depreciation - motor vehicles Total Assets Liabilities Accounts payable Rent payable Dividends payable Loan Total Liabilities Shareholders' Equity Share Capital Retained Earnings General Reserve Total Shareholders' Equity Total Liabilities and Shareholders' Equity 40,800 75,847 39,230 | 31,385 13.083 3.104 39,200 83,700 132,313 194,036 275,000 80,000 227,219 168,000 38,000 540,219 248,000 672,532442,036 The Income Statement of Belmore Ltd for the financial year ended 30 June 2016 is provided below: 854,387 (623,391) 230,996 Income Sales Revenue Less: Cost of Goods Sold Gross Profit Expenses Insurance expense Rent Expense Depreciation Expense Loss on disposal of motor vehicle Other Expenses Total Expenses Net profit 15,566 24,963 5,400 4,900 69,865 (120,694) $ 110,302 QUESTION TWO continued on next page QUESTION TWO (continued) Additional Information: During the financial year ending 30 June 2016: The company declared a final dividend of $13,083. - Increase in general reserve was solely due to amount transferred from retained earnings. New ordinary shares were issued for cash. The original cost of the motor vehicle sold during the year was $16,300. The carrying amount of motor vehicle sold was $6,550 at the time of sale. REQUIRED: (0) Prepare a fully classified Statement of Cash Flows for Belmore Ltd for the year ended 30 June 2016, using the direct method to present cash flows. (ii) The term 'Solvency' refers to entity's ability to survive a long period of time. Based on the Statement of Cash Flows prepared above, comment on the solvency of Belmore Ltd in 2016