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Westferry Ltd has provided you with comparative statements of financial position for the years ended 30 June 2020 and 2021, and a summary of the
Westferry Ltd has provided you with comparative statements of financial position for the years ended 30 June 2020 and 2021, and a summary of the company's income statement for the year ended 30 June 2021: 2021 2020 ASSETS Current Assets $ $ Cash 125,500 98,000 Accounts Receivable 195,000 212,000 Provision for Doubtful Debts (15,000) (20,000) Inventory 315,000 280,000 Total Current Assets 620,500 570,000 Non-Current Assets Plant & Equipment at cost Accumulated Depreciation - Plant & Equipment Total Non-Current Assets TOTAL ASSETS 385,000 350,000 (175,000) (155,000) 210,000 195,000 830,500 765,000 LIABILITIES AND OWNERS' EQUITY $ $ Liabilities Accounts Payable 200,000 175,000 Current Tax Payable 57,000 51,000 Total Liabilities 257,000 226,000 Owners' Equity Share Capital 330,500 320,500 General Reserve 55,000 50,000 Retained Profits 188,000 168,500 Total Equity 573,500 539,000 TOTAL LIABILITIES AND OWNERS' EQUITY 830,500 765,000 Revenue Net Sales Cost of Goods Sold Gross Profit Other income Interest Gain on Sale of Equipment (Carrying Amount: $45,000) $ 475,000 155,000 320,000 18,000 8,500 346,500 Expenses Wages Expense 85,000 Discounts to Customers 12,000 Depreciation Expense - Plant & Equipment 52,000 Doubtful Debt Expense 8,500 157,500 Net Profit Before Tax 189,000 Income Tax Expense Net Profit After Tax Additional Information: The company issued $10,000 in bonus shares in 2021. 13,000 176,000 Required: i. Calculate the cash paid for the purchase of equipment during the year. Show all workings. (5 marks) ii. The company received cash for the sale of equipment to a customer. The sale of this type of equipment is outside of Westferry Ltd's principle revenue-producing activities as a clothing retailer and the transaction was unrelated to the sale of clothing to the customer. Your manager has asked you whether this cash inflow can be classified as an 'operating activity on the basis that: Explain: the cash was received from a customer; and the classification will have no impact on the reported balance of cash and cash equivalents in the bottom section of the cash flows statement. a. Why the manager might prefer to classify this cash inflow as an operating activity, and why the classification is important for users of Westferry Ltd's financial statements? (3 marks) b. What information a Cash Flows Statement shows that is in additional to an income statement or balance sheet? (2 marks)
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