ABC Company.docx Cash Flow

ABC Company
Comparative Statement of Financial Position

As of December 31, 2019 and 2018
31/12/1 31/12/18
9
Equipment 154,000 130,000
Accumulated depr.—equipment (35,000) (25,000)
Copyrights 46,000 50,000

Inventory 40,000 60,000
Prepaid rent 5,000 4,000
Accounts receivable 60,000 49,000
Short-term investments (trading) 35,000 18,000
Cash 8,000 9,000
Total assets 313,000 295,000
Share capital—ordinary, 10 Tk. par 100,000 100,000

Share premium—ordinary 30,000 30,000
Retained earnings 57,000 36,000
Long-term loans payable 60,000 67,000
Accounts payable 46,000 42,000
Income taxes payable 4,000 6,000
Salaries and wages payable 8,000 4,000
Short-term loans payable 8,000 10,000
Total equity and liabilities 313,000 295,000
ABC Company
Income Statement
For the Year Ending December 31, 2019
Sales revenue 338,150

Cost of goods sold 175,000
Gross margin 163,150
Operating expenses 120,000
Operating income 43,150
Interest expense 11,400
Gain on sale of equipment 2,000 9,400
Income before tax 33,750
Income tax expense 6,750
Net income. 27,000
Additional information:
Dividends in the amount of 6,000 Tk. were declared and paid during 2019. Depreciation expense
and amortization expense are included in operating expenses. No unrealized gains or losses have
occurred on the investments during the year. Equipment that had a cost of Tk. 30,000 and was
70% depreciated was sold during 2019.
Required: Prepare a statement of cash flows using the direct method and indirect method.
ABC Company
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities

Less: Cash received from customers............... €327,150a
Cash paid to suppliers........................................ €151,000b
Cash paid for operating expenses..................... 82,000c
Cash paid for interest.......................................... 11,400c
Cash paid for income taxes................................ 8,750d 253,150a
Net cash provided by operating activities......... 74,000a
Cash flows from investing activities

Sale of equipment
[€30,000 – (€30,000 X .7)] + €2,000................... 11,000
Purchase of equipment
[€154,000 – (€130,000 – €30,000)]................... (54,000)
Purchase of trading investments....................... (17,000)
Net cash used by investing activities................ (60,000)
Cash flows from financing activities

Principal payment on short-term loan............... (2,000)
Principal payment on long-term loan................. (7,000)
Dividend payments.............................................. (6,000)
Net cash used by financing activities................ (15,000)
Net decrease in cash...................................................... (1,000)

Cash, January 1, 2019.................................................... 9,000
Cash, December 31, 2019.............................................. € 8,000
a
Sales Revenue............................................................... €338,150
Increase in accounts receivable................................... (11,000)
Cash received from customers..................................... €327,150
b
Cost of goods sold........................................................ €175,000
Increase in accounts payable........................................ (4,000)
Decrease in inventories................................................. (20,000)
Cash paid to suppliers................................................... €151,000
c
Operating expenses....................................................... €120,000
Increase in prepaid rent.................................................. 1,000
Depreciation expense
€35,000 – [€25,000 – (€30,000 X .70)]...................... (31,000)
Amortization of copyright............................................... (4,000)
Increase in salaries and wages payable........................ (4,000)
Cash paid for operating expenses................................. € 82,000
d
Income tax expense....................................................... € 6,750
Decrease in income taxes payable................................. 2,000
Cash paid for income taxes............................................ € 8,750
ABC Company
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities
Net income................................................................. €27,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense....................................... €31,000*
Amortization of copyright................................ 4,000
Gain on sale of equipment............................... (2,000)
Decrease in inventory....................................... 20,000
Increase in wages payable............................... 4,000
Increase in accounts payable.......................... 4,000
Increase in prepaid rent................................... (1,000)
Increase in accounts receivable...................... (11,000)
Decrease in income taxes payable.................. (2,000) 43,000
Net cash provided by operating activities...... 74,000
Cash flows from investing activities
Sale of equipment [(€30,000 X 30%) + €2,000]....... 11,000
Purchase of equipment
[€154,000 – (€130,000 – €30,000)]........................ (54,000)
Purchase of trading investments............................ (17,000)
Net cash used by investing activities..................... (60,000)
Cash flows from financing activities
Principal payment on short-term loan.................... (2,000)
Principal payment on long-term loan...................... (7,000)
Dividend payments................................................... (6,000)
Net cash used by financing activities..................... (15,000)
Net decrease in cash......................................................... (1,000)

Cash, January 1, 2019....................................................... 9,000
Cash, December 31, 2019.................................................. € 8,000
*€35,000 – [€25,000 – (€30,000 X 70%)]

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ABC Company

Comparative Statement of Financial Position

Copyrights 46,000 50,000

Share capital—ordinary, 10 Tk. par 100,000 100,000

Sales revenue 338,150

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Net decrease in cash...................................................... (1,000)

Net decrease in cash......................................................... (1,000)

*€35,000 – [€25,000 – (€30,000 X 70%)]

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