Question

Application Problem 5-5A a-b (Part Level Submission) Organic Developments Ltd. (ODL) is an importer of organic produce from California. The company has been experiencing significant growth and is preparing to approach the bank for a loan to acquire additional capital assets. As CFO, you are tasked with preparing the statement of cash flows that is required as part of the loan application. You have the statement of financial position and the statement of income to help you prepare the statement of cash flows. In addition you also have the following information: 1. During the year, the company borrowed $10,360 by increasing its bank loan payable. In September, ODL sold equipment for $4,440 cash. The equipment had originally cost $99,160 and had a net carrying amount of $10,360 at the time of sale. 3. In June, ODL acquired land with a value of s88,800 by issuing common shares with an equivalent value. The land is to be used as a site for a warehouse it hopes to construct in the next year ORGANIC DEVELOPMENTS LTD. Statement of Financial Position Assets $35,520 $26,640 Accounts receivable 133,20ת Inventory 118,400 211,640 195,360 Total current assets Equipment Accumulated depreciation, equipment 399,600 (222,000) (266,400) Liabilities and shareholders' equity Current liabilities $ 60,680 Accounts payable Dividends payable 22,200 26,640 82,880 56,240 Total current liabilities Bank loan payable 54,760 88,800 Common shares 222,000 133,200 Retained eamings 177,600 50,320 $537,240 ORGANIC DEVELOPMENTS LTD. Statement of Income For the year ended October 31, 2020 $769,600 Cost of goods sold 384,800 Gross margin Expenses Advertising expense 22,200 Wage expense 106,560 Utilities expense 8,880 Depreciation expense Rent expense 44,400 19,240 201,280 Loss on sale of equipment 5,920 $177,600 (a) Using the information above, prepare the statement of cash flows for Organic Developments Ltd. for the year ended October 31, 2020, using the indirect method. (Show amounts that decrease cash flow with either a sign e.g. -15,000 or in parenthesis e.g. (15,000).) Organic Developments Ltd. Statement of Cash Flows, Indirect Method For the Year Ended October 31, 2020

Answer 1

Amount $ 177,600 Organic Development Ltd Cashflow Statement using Indirect method as at 31st October 2020 :- Particulars Amount $ Cash Flows From Operating Activities: Net Income Adjustments to Reconcile Net Income to Net Cash Provided by operations : Add: Depreciation Expense 44,400 Add: Loss on sale of equipment 5,920 Changes in Working Capital :- Add: Decrease in Accounts receivable 7,400 Less: Increase in Inventory (14,800) Add: Increase in Accounts Payable 31,080 74,000 Net cash provided/(used) by Operating Activities 251,600 Cash Flows From Investing Activities: Cash received from sale of Old Equipment Cash paid for Purchase of Equipment Change in cash due to Investing Activties 4,440 (158,360) (153,920) (54,760) (44,400) 10,360 Cash Flows From Financing Cash paid for Dividends (26640+50320-22200) Cash paid for repayment of bank loan Cash received from new bank loan Change in cash due to Financing Net Changes in Cashflow from all activities Cash at the beginning of the year Cash at the end of the year (88,800) 8,880 26,640 35,520 Note :- Acquisition of land with common stock doesn't effect the cashflow As net income for the year is equal to closing retained earnings, entire opening balance of retailed earnings is dividends declared for the year.