Reference no: EM132321757

Question : Statement of Cash Flows

Set out below are Square Ltd financial statements for the year ending 31 December:

Square Limited Comparative Balance Sheet as at 31 December
	2018	2017
Assets
Cash	$ 144,000	$ 139,000
Accounts Receivable	270,000	250,000
Allowance for Doubtful Debts	(30,000)	(35,000)
Inventory	180,000	160,000
Land	150,000	150,000
Plant	100,000	90,000
Accumulated Depreciation - Plant	(20,000)	(30,000)
Total Assets	$ 794.000	$ 794,000
Liabilities and Shareholders' Equity
Bank Overdraft	20,000	19,000
Accounts Payable	200,000	190,000
Accrued Salaries	22,000	18,000
Long-term Loan	90.000	70,000
Contributed Equity	120.000	100,000
Retained Earnings	342 000	327 000
Total Liabilities and Shareholders' Equity	S 794 000	$ 794000

Part C continued

An examination of the accounting records revealed the following additional information applicable to 2018:

a. Contributed Equity increased by the issue of 20,000 $1 bonus shares out of Retained Earnings.

b. During the year, additional plant was purchased in cash.

c. All sales and purchases were on account.

d. Accounts payable pertains to inventory creditors.

e. The bank overdraft in the business is considered to be an integral part of the business's cash management arrangements.

f. Interest expense was paid in cash.

Required: For the purpose of this question, please ignore GST and Income Tax, but show all your workings.

(i) Prepare a Statement of Cash Flows for Square Ltd for the year ending 31 December 2018 usiu the direct method.

(ii) Prepare a reconciliation of net profit to net cash provided from operating activities.

                                  Square Limited- Income Statement
                                for the year ended 31 December 2018

Sales                                                                                               $ 250,000

Less Cost of Goods Sold                                                                      (130.000)

Gross Profit                                                                                       120,000

Less Expenses:

Depreciation Expense                                                       10,000

Bad Debts Expense                                                          25,000

Salaries Expense                                                             30,000

Interest Expense                                                             20.000

Total Expenses                                                                                                       (85.000)

Net Profit                                                                                                                  $45 000