Question

End of Chapter Problem 18.21 The following data relate to Emporium Ltd: Emporium Ltd Income statement for year ended 30 June 2020 Income Sales revenue $1,205,000 Expenses Cost of sales $710,000 Depreciation – machinery 30,000 Depreciation – buildings 17,000 Other expenses 309,500 1,066,500 Profit $138,500

Answer 1

Solution:
	Statement of Cash Flows - Direct Method
	© www.excel-skills.com	Amount
	Cash flows from operating activities
	Cash Receipts:
	Cash receipts from customers (Wn1)	$    1,232,000
	Cash Payments:
	Cash paid to Supplies and Employees	$ -1,060,000
	Cash Generated from Operation	$       172,000
	Net cash from operating activities		$    172,000
	Cash flows from investing activities
	Purchase of investment	$         -3,000
	Purchase of Property Plant & Equipment	$     -300,500
	Net cash used in investing activities		$   -303,500
	Cash flows from financing activities
	Proceeds from Mortgage Payable	$          87,000
	Proceeds From issue of Share Capital	$         80,000
	Dividend Paid	$       -45,000
	Net cash used in financing activities		$    122,000
	Net decrease in cash and cash equivalents		$       -9,500
	Cash and cash equivalents at beginning of period		$      55,500
	Cash and cash equivalents at end of period		$      46,000
	Working notes: 1
	Calculation of cash collection from customer
	Sales	$        1,205,000
	Add: Opening Net AR	$            142,000
	Less: Closing Net AR	$            115,000
	Cash Collected (A)	$        1,232,000
	Working notes: 2
	Calculation of purhcase of inventory
	Cost of Goods Sold	$            710,000
	Add: Closing inventory	$            179,000
	Less : Opening Inventory	$            124,000
	Material Purhcased	$            765,000
	Calculation of amount paid to supplied
	Op. Balance of Acct Payable	$              90,400
	Add: Purchases	$            765,000
	Less: Cl. Balance of Account payable	$            105,400
	Cash paid (A)	$            750,000
	Working notes: 3
	Calculation of amount paid for other operating expenses
	Other Expenses	$            309,500
	Add: Decrease in Expenses Payable	$                    500
	Cash Paid (B)	$            310,000
	Total Cash Paid (A+B)	$        1,060,000