Reconstruction of accounts (formulae) approach

Below are the statements of financial position of Lodh Ltd as at 30 June 2020 and 2021, and its statement of profit or loss and statement of changes in equity for the year ended 30 June 2021:

Additional information

(a) Land with an original cost of $44 800 was sold for cash of $37 800 during the year.

(b) Machinery with a carrying amount of $25 000 (cost $33 000 and accumulated depreciation $8000) was sold for cash of $34 000.

(c) Lease income is earned from leasing part of the land holdings that are in excess to operating needs.

Required:

1. Prepare a note disclosure to reconcile the net cash flows from operating activities with the profit for the year using indirect method. (7 marks)
2. Prepare the statement of cash flows of Lodh Ltd for the year ended 30 June 2017 based on the direct method of presentation. (3 marks)

2020 $ $ Lodh LTD Statements of Financial Position as at 30 June 2021 Assets Cash at bank 23 000 Accounts receivable 39 500 Inventory 76 000 Prepaid insurance 3 500 Land 39 000 Machinery 360 000 Accumulated depreciation: machinery (81 000 Total assets 460 000 Liabilities Accounts payable 25 000 Interest payable 3 000 Other accrued expenses 7 000 Long-term borrowings 145 000 Equity Share capital 170 000 Retained earnings 110 000 Total liabilities and equity $ 460 000 6 500 37 500 66 000 3 600 44 700 300 000 167 000 391 300 $ $ $ $ 28 000 3 500 4 400 117 000 100 000 141 400 391 300 425 000 7500 8 000 $ 440 500 Lodh LTD Statement of Profit or Loss for the year ended 30 June 2021 Income Sales $ Lease income received Gain on the sale of machinery Less: Expenses Cost of sales Interest expense Loss on the sale of land B Depreciation expense Insurance expense Other operating expenses Profit for the year $ 280 000 11 500 9000 24 000 3 500 81 500 409 500 310.00 Total Lodh LTD Statement of Changes in Equity for the year ended 30 June 2021 Share Other Retained capital reserves earnings $100 000 S 141 400 41 000 (72 400) 70 000 $170 000 110 000 Balance at 1/7/20 Profit the period Dividends paid Issue of share capital Balance at 30/6/21 S 241 400 41 000 (72 400 70 000 280 000 S 2020 $ $ Lodh LTD Statements of Financial Position as at 30 June 2021 Assets Cash at bank 23 000 Accounts receivable 39 500 Inventory 76 000 Prepaid insurance 3 500 Land 39 000 Machinery 360 000 Accumulated depreciation: machinery (81 000 Total assets 460 000 Liabilities Accounts payable 25 000 Interest payable 3 000 Other accrued expenses 7 000 Long-term borrowings 145 000 Equity Share capital 170 000 Retained earnings 110 000 Total liabilities and equity $ 460 000 6 500 37 500 66 000 3 600 44 700 300 000 167 000 391 300 $ $ $ $ 28 000 3 500 4 400 117 000 100 000 141 400 391 300 425 000 7500 8 000 $ 440 500 Lodh LTD Statement of Profit or Loss for the year ended 30 June 2021 Income Sales $ Lease income received Gain on the sale of machinery Less: Expenses Cost of sales Interest expense Loss on the sale of land B Depreciation expense Insurance expense Other operating expenses Profit for the year $ 280 000 11 500 9000 24 000 3 500 81 500 409 500 310.00 Total Lodh LTD Statement of Changes in Equity for the year ended 30 June 2021 Share Other Retained capital reserves earnings $100 000 S 141 400 41 000 (72 400) 70 000 $170 000 110 000 Balance at 1/7/20 Profit the period Dividends paid Issue of share capital Balance at 30/6/21 S 241 400 41 000 (72 400 70 000 280 000 S