Question

The following information is from Clover Company for the year ended 31 December 2019.

Collection of principal on long-term loan to a supplier R35 000
Acquisition of equipment for cash R10 000
Proceeds from sale of long-term investment a book value R27 000
Issuance of ordinary shares for cash R20 000
Depreciation expense R25 000
Redemption of bonds payable at carrying value R24 000
Payment of cash dividends R9 000
Net income R35 000
Purchase of land by issuing bonds payable R40 000

In addition, the following information is available from the comparative statement of financial position as at 2018 and 2019:

2018
2019

Cash
R14 000
R107 000

Accounts receivable
R15 000
R20 000

Prepaid insurance
R13 000
R17 000

Total current assets
R42 000
R144 000

Accounts payable
R19 000
R25 000

Salaries payable
R7 000
R4 000

Total current liabilities
R29 000
R26 000

Required:

1.1 Prepare the statement of cash flows using the indirect method.

Answer 1

Operating Activities:
Net Income		35,000
Add: Depreciation	25,000
Increase in Accounts receivables	(5,000)
Increase in Prepaid insurance	(4,000)
Increase in Accounts payable	6,000
Decrease in Salaries payable	(3,000)	19,000
Net Cash from Operating Activities		54,000
Investing Activities:
Collection of principal on long-term loan	35,000
Acquisition of equipment for cash	(10,000)
Proceeds from sale of long-term investment	27,000
Net Cash from Investing Activities		52,000
Financing Activities:
Issuance of ordinary shares for cash	20,000
Redemption of bonds payable	(24,000)
Payment of cash dividends	(9,000)
Net Cash from Financing Activities		(13,000)
Increase/Decrease in Cash		93,000
Beginning Cash		14,000
Ending Cash		107,000