Reference no: EM132990483

Question - CASH FLOW STATEMENTS -

PART A - The following transactions were undertaken by Paradise Juices Limited during the financial year ended 30th June, 2020.

1. Issued 4% debentures for $1,000,000.

2. Sold a used truck for $300,000 with a carrying amount of $100,000.

3. Purchase of land for future expansion of the business for $500,000 cash.

4. Paid off a $400,000 long term loan plus interest of 40,000.

5. Paid a cash dividend of $200,000.

6. Purchased a new truck paying $60,000 cash and signing a loan for $120,000.

7. Purchased shares in Tropical Juice Limited to be held as long term investment for $220,000 cash.

8. Issued ordinary shares for cash $4,000,000.

9. Purchased shares in Salty Juice Limited to be held as an investment for $600,000 cash.

10. Sold a long term government bond with a carrying amount of $200,000 for $250,000 including accrued interest of $20,000.

REQUIRED - Please explain by preparing a correctly classified cash flow statement of Paradise Juices Limited for the year ended 30th June, 2020.

PART B - The 2021 accounting records of Hi-Fi Systems Limited shows opening cash at bank balance of $12,000.

The following transactions and events have occurred during the year.

Items $

Opening Cash at Bank balance 12,000, Cash Sales 80,300, Depreciation Expense 44,300, Issue of Ordinary Shares for cash 50,000, Loss on sale of vehicle 8,450, Payment of dividend 14,630, Payment of Income Tax 21,000, Payment of Interest 6,500, Payment of Other Expenses 21,600, Payment of Wages 69,530, Payment to Accounts Payable 81,340, Proceeds of Sale of vehicle 22,000, Profit after income tax 19,000, Purchase of land for cash 50,000, Receipts from Accounts Receivable 150,000, Receipt of Dividend income 15,000, Receipt of Interest Income 4,300 ,Redemption of Bonds for Cash 22,000, Sale of Equipment for cash 23,000.

Required - Please explain by preparing a fully classified Statement of Cash Flows for Hi-Fi Systems Limited for the year ended 30th June, 2021.

PART C - Critical Thinking Scenario "It was overheard from a student that he is confused as to why we should make a cash flow statement when we have the income statement providing the same information". Critically evaluate this statement.