Question

Below are the income statement and comparative balance sheet of Doone Corporation for year ending Dec 31, 2019 is given below. All amounts in Canadian dollars. Required: Prepare the cashflow statement, clearly including operating, financing and investing activities up to the net change in cash using the Indirect method as of Dec 31, 2019. Doone Corporation Income Statement For the Year ended Dec 31, 2019 Sales Revenue 670,000 Less: Cost of Goods Sold 340,000 Gross Profit 330,000 Less: Selling, General and Administrative Expenses 85.000 Operating profit 245,000 Less: Depreciation expense 55,000 Earnings before interest and taxes 190,000 Less: Interest expense 25,000 Earnings before taxes 165,000 Less: tax expense (40%) 66,000 Net Income 99,000 Doone Corporation Comparative Balance Sheet Dec 31, 2018 and 2019 2018 2019 Cash 12,000 16,000 Marketable securities 23,000 24,000 Accounts receivables 50,000 65.000 Inventory 60,000 55,000 Investments 62.000 51.000 Total current assets 207,000 211,000 Property, Plant & Equipment 540,000 630,000 Less: Accumulated Depreciation 55,000 75,000 Net Prop., Plant & Equipment 485,000 555,000 Total Assets 492.000 100

Answer 1

Working notes: T- Accounts $99,000 Doone Corporation Statement of Cash flows (Indirect method) For the Year Ended December 31, 2019 Cash flows from Operating Activities Net Profit Adjustments to reconcile net profit to net cash provided by Operating Activities Depreciation expense $55,000 Change in operating current assets and liabilities Increase in Accounts receivable -$15,000 Decrease in Inventory $5,000 Increase in Accounts payable $14,000 Decrease in Accrued expenses $4,000 Decrease in Salaries payable -$4,000 Property, plant and Equipment Opening balance $540,000 Accumulated Dep Bank $125,000 Closing balance $665,000 $35,000 $630,000 $665,000 Accumulated Depreciation- PPE PPE $35,000 Opening balance Closing balance $75,000 Depreciation $110,000 $55,000 $55,000 $110,000 $51,000 $150,000 -$1,000 $11,000 $125,000 Cash dividend Closing balance Retained Earnings $72,000 Opening balance $29,000 Bank $101,000 $2,000 $99,000 $101,000 $115,000 Net Cash from Operating Activities Cash flows from Investing Activities Purchase of Marketable securities Sale of Investments Purchase of Equipment Net Cash from Investing Activities Cash flows from Financing Activities Borrowing through Bonds payable Repayment of notes payable Cash dividend paid Net Cash from Financing Activities Net increase (decrease) in cash Cash balance at beginning of the year Cash balance at end of the year $45,000 -$4,000 $72,000 -$31,000 $4,000 $12,000 $16,000