The following information relates to Egoly Ltd for the year ended 30^thJune 2019:

EGOLY LTD

BALANCE SHEET

AS AT 30^thJUNE 2019

2019

2018

$

$

ASSETS

Current Assets

Cash at bank

67,710

59,666

Accounts receivable

252,760

283,290

Inventory

1,107,600

951,400

Prepaid expenses

113,600

35,500

Total current assets

1,541,670

1,329,856

Non-current assets

Equipment

1,263,800

823,600

Accumulated depreciation - equipment

(238,560)

(143,136)

Total non-current assets

1,025,240

680,464

TOTAL ASSETS

2,566,910

2,010,320

LIABILITIES & SHAREHOLDERS EQUITY

Current Liabilities

Accounts payable

348,916

391,940

Accrued expenses

36,920

44,000

Income tax payable

24,400

28,000

Total current liabilities

410,236

463,940

Non-current liabilities

Bills payable

75,260

45,440

Debentures payable

198,800

284,000

Total non-current liabilities

274,060

329,440

TOTAL LIABILITIES

684,296

793,380

Shareholders' Equity

Share capital

1,491,000

852,000

Retained profits

391,614

364,940

Total shareholders' equity

1,882,614

1,216,940

TOTAL LIABILITIES & SHAREHOLDERS EQUITY

2,566,910

2,010,320

QUESTION 3 CONT'D

The Income Statement and general ledger for the year ended 30^thJune 2019 reflected the following:

PERFORMANCE DETAILS

Sales

3,030,053

Less: sales returns

(59,413)

Net sales

2,970,640

Cost of goods sold

1,928,360

General expenses (All expenses EXCLUDING depreciation, bad debts written off & Income tax expense)

606,482

Income tax expense

97,860

Bad debts written off

2,840

Depreciation expense

109,624

Profit after tax$225,474

Additional information:

1.A fully depreciated machine with a cost of $14,200 was scrapped during the year. No proceeds were received when it was scrapped.

2.New equipment was purchased for cash during the year.

3.No new debentures were issued during the current year.

4.As at 1^stJuly 2018, Egoly had 284,000 shares issued, at an issue price of $3 per share. During the current year, Egoly issued an additional 213,000 fully paid shares at an issue price of $3 per share.

5.A cash dividend of 40c per share was declared and paid during the year on all issued shares including those issued during the year.

6.Bills payable are used by Egoly as part of their longer-term cash management and are repayable within five years.

REQUIRED:

1.Prepare a cash flow statement for Egoly Ltd using the DIRECT method for the year ended 30^thJune 2019.[18 Marks]

2.Wayne Deng is reviewing the statement of cash flows for his technology business. The statement has been provided by his accountant. He is concerned that the statement shows net cash outflows for investing activities. Discuss if Wayne should be worried by this.[3 marks].