Question

Using the information below, complete (i) the operating cash flow section of the Statement of Cash Flows and (ii) the note to the accounts for Trader Ltd. Your presentation must be consistent with the requirements of AASB107 .

The balances of selected accounts of Trader Ltd at 30 June 2019 and 30 June 2020 were ($000):

	2019	2020
Sales (on credit)	7850	6380
Cost of goods sold	1450	1100
Doubtful debts expense	295	325
Rent expense	550	470
Salaries expense	830	740
Depreciation expense	290	180
Cash	3000	1100
Inventory	3800	4500
Accounts receivable	2200	3700
Allowance for doubtful debts	340	280
Land	4000	4000
Plant	2750	2800
Accumulated depreciation	490	450
Accounts payable	3200	3500
Rent payable	100	30
Salaries payable	120	90
Share capital	1000	1000

Additional information:

• net profit after tax for financial year 2020 was $ 3565.
• reporting date is 30 June.

Required:

(i) Trader Ltd’s operating cash flow section extracted from the Statement of Cash Flows for year ended 30 June 2020

(ii) Reconciliation of net cash by operating activities to net profit

Answer 1

Trader Ltd. Statement of Cash Flows ( Partial ) For the year ended June 30, 2020
Cash Flows from Operating Activities
Net profit		$ 3,565
Adjustments to reconcile net profit to net cash provided by operations
Depreciation Expense	180
Doubtful Debts Expense	325
Increase in inventory	(700)
Increase in Accounts Receivable ( including writeoffs of $ 385)	(1,885)
Increase in Accounts Payable	300
Decrease in Rent Payable	(70)
Decrease in Salaries Payable	(30)	(1,880)
Net cash flows from Operating Activities		$ 1,685

Workings:

Accounts Receivable
Beg. bal. ( gross )	2,200	Writeoff	385
Sales	6,380	Cash collections	4,495
End. bal. ( gross )	3,700
Allowance for Doubtful Accounts
Writeoff	385	Beg. bal.	340
		Doubtful debt expense	325
		End. bal.	280