The 2014 comparative balance sheet and 2014 income statement of Byfield Co Ltd, have just been distributed at a meeting of the companys board of directors. The members of the board of directors were desirous of knowing the reason or reasons why the cash balance different from the net income. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the directors. The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following :

Financial info to be used : ( images attached with notes)

Requirements

• Reconstruct the companys comparative balance sheet for 2013/2014 using the information and compute and show the missing figures to include the appropriate sign as a positive or negative figure.

• Which category of the statement of cash flow is considered as the most important? Why?

• Prepare a complete statement of cash flows for 2014 using the indirect method using the information.

Simple Things Industries Ltd. Comparative Balance Sheet December 31, 2014 and 2013 2014 2013 Increase/(Decrease) Assets Cash 175,000 15,000 ? Accounts Receivable 230,000 220,000 ? Inventories 310,000 340,000 ? Prepaid expenses 30,000 10,000 ? Intangible assets 105,000 105,000 ? Equipment, net 860,000 830,000 ? Total Assets 1,710,000 1,520,000 Liabilities Accounts payable 90,000 140,000 ? Accrued liabilities 190,000 160,000 ? Income tax payable 120,000 140,000 ? Long-term notes payable 360,000 450,000 ? Stockholders' Equity Common Stock 400,000 250,000 ? Retained earnings 640,000 400,000 ? Treasury stock (90,000) (20,000) ? Total liabilities and stockholders' equity 1,710,000 1,520,000 1,920,000 Simple Things Industries Ltd Income Statement Year Ended December 31,2014 Revenues and gains: Sales revenue 1,900,000 Gain on sale of equipment 20,000 Total revenues and gains Expenses Cost of goods sold 850,000 Depreciation expense 190,000 Other operating expense 360,000 Total expenses Income before income taxes Income tax expense Net Income 1,400,000 520,000 180,000 340,000 Notes 320,000 120,000 Acquisition of plant asset during 2014 Sale proceed from sale of equipment Receipt for issuance of notes payable Payment for note payable Dividend paid 10,000 100,000 100,000 Book value of equipment sold 100,000