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You are provided with the following balance sheets and supplementary information about Summer Ltd. for the year ended December 31, 2018. Summer Ltd Balance Sheet
You are provided with the following balance sheets and supplementary information about Summer Ltd. for the year ended December 31, 2018. Summer Ltd Balance Sheet As of December 31, 2018 Cash 522,500 Accounts receivable 750,000 Inventory 2,062,500 Land 3,750,000 Plant and equipment 10,000,000 Accumulated depreciation (3,250,000) Intangibles (net of amortization) 2,125,000 Total Assets 15,960,000 2017 62,500 562,500 2,212,500 2,250,000 8,251,875 (2,625,000) 10,714,375 Accounts payable and accrued liabilities Income tax payable Long-term debt 2,300,000 25,000 6,615,000 2,010,000 60,000 6,000,000 Common shares Retained Earnings 3,787,500 3,232,500 15,960,000 1,125,000 1,519,375 10,714,375 Summer Ltd Statement of Comprehensive Income For the year ended 31 December 2018 Revenue 22,000,000 Cost of sales 16,280,000 Gross margin 5,720,000 Selling, general, and 1,625,000 administrative expenses Depreciation expense 1,150,000 Amortization expense 125,000 Interest expense 525,000 Gain on sale of equipment (150,000) Income tax expense 300,000 Net income 2,145,000 Information: 1. 2. Long-term debt of $3,375,000 was retired by paying cash to the long-term debt holders Purchase intangibles in exchange for common shares. The shares and the patent were estimated to have a fair market value of $2,250,000 when they were purchased Sold equipment with a cost of $750,000 and accumulated depreciation of $525,000 for $375,000 cash. Purchased new plant and equipment for cash and $750,000 in long-term debt Other changes in asset, liability, and equity accounts flow from logical sources. 3. 4. 5. Required: 1. Prepare Spring Ltd.'s cash flow statement for the year ended December 31, 2018, in good form. You may use either the direct or indirect method for cash from operations (20 marks) 2. Provide all necessary disclosures (4 marks)
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