Question

The 2019 accounting records of Pape Transport reveal these transactions and events.
Payment of interest		$74,924		Payment of salaries and wages		$397,098
Cash sales		359,636		Depreciation expense - vehicles		119,879
Receipt of dividend revenue		134,863		Proceeds from sale of vehicles		6,083,839
Payment of income tax		89,909		Purchase of vehicles for cash		164,833
Profit		284,712		Loss on sale of vehicles		22,477
Payments for inventory		726,764		Payment of operating expenses		209,788
Payment for land		554,438		Retained earnings at the start of the year		507,500
Collection of accounts receivable		1,461,020		Retained earnings at the end of the year		531,100
Required
a) Prepare the cash flows from operating activities section for the year ended 31 December 2019 using the direct method.
b) How much was the payment of dividends?
c) During the year equipment was sold, and the company recorded a profit on sale of equipment in the income statement of $5,000.
This equipment cost $49,500  originally and had a carrying amount of $14,800 at the time of sale.
What were the proceeds from the sale of the equipment?

Answer 1

a)

Pape Transport

Cash flows from Operating activities for the year ended 2019 - Direct method

Particulars	Amount (in $)	Amount (in $)
Cash Sales		3,59,636
Add: Collection of accounts receivables		14,61,020
		18,20,656
Less: Paid for Operating expenses
Payment of salaries and wages	3,97,098
Payment of operating expenses	2,09,788	6,06,886
Cash generated		12,13,770
Less: Income tax paid		89,909
Net cash flow from Operating activities		11,23,861

b) From the given information, it can be said that there were no payment of dividends in the year 2019. Retained earnings has only increased by the end of the year and there is no proposed dividend.

c) Carrying amount of the equipment as given is $14,800

Profit on the sale being $5,000

Proceeds from the sale of the equipment will be $19,800 (i.e. $14,800+$5,000)

Original book value is irrelevant in the given case.