Use the information in Exhibit 5.6 to prepare a statement that shows cash from operations calculated using
Question:
Use the information in Exhibit 5.6 to prepare a statement that shows cash from operations calculated using the direct method. Your statement should show the amount of cash collected from customers, the amount paid to suppliers, and the amounts paid in interest and taxes.
Magnotta Winery Corporation (Magnotta) is Ontario’s third-largest winery and the only company of its kind in Canada licensed to produce and sell wine, beer, and distilled products. With over 3,000 awards to date for product excellence, Magnotta is Canada’s most award winning winery.
The company makes wine under the VQA label using grapes grown on its own 180 acres of vineyards in Ontario’s Niagara Peninsula. Certain grapes are reserved for the production of icewine, which is made from grapes picked during winter. The company owns a 351-acre vineyard in Chile’s Maipo Valley. It uses some of the produce of that vineyard for its own wines and sells the rest to Chilean wineries. The company also brews premium beers under the Magnotta name.
Through its Festa Juice subsidiary, Magnotta produces juice used for home-based wine production.*
Magnotta’s consolidated balance sheets and statements of cash flows and earnings, along with extracts from the notes to the financial statements, are provided in Exhibit 5.6.
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