Question

The comparative statement of financial position for Cullumber Retailers Ltd. follows:

CULLUMBER RETAILERS LTD. Statement of Financial Position December 31
Assets		2018				2017
Cash		$	0			$	15,000
Accounts receivable			79,000				51,000
Inventory			221,000				166,000
Furniture			137,000				167,000
Accumulated depreciation			(38,000	)			(49,000	)
Total assets		$	399,000			$	350,000
Liabilities and Shareholders’ Equity
Bank overdraft		$	13,000			$	0
Accounts payable			67,000				42,000
Bank loan payable (noncurrent)			88,000				102,000
Common shares			55,000				65,000
Retained earnings			176,000				141,000
Total liabilities and shareholders’ equity		$	399,000			$	350,000

Additional information:

1.		Net income was $40,000 in 2018.
2.		Depreciation expense was $15,000 in 2018.
3.		In 2018, no new bank loans were received.
4.		In 2018, no furniture was purchased, but some furniture was sold for $7,000, which resulted in a gain on this disposal of $3,000.
5.		No common shares were issued during the year but some were reacquired at the cost at which they were originally issued.
6.		In 2018, dividends were declared and paid.

(a)

Prepare a statement of cash flows using the indirect method for 2018. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Statement of Cash Flows
Cash Flow From Operating acivities:
Net Income		40000
Adjustments to reconcile net incometo net cash provided by operating activities:
Deprecition Expense	15000
Gain on sale of Equipment	-3000
Increase in accounts Receivable	-28000
Increase in Inventory	-55000
Increase in bank Overdraft	13000
Increase in Accounts Payable	25000	-33000
Net cash provided by operating activities		7000
Cash flow from Investing activities
Sale of furniture	7000
Net cash used by investing activities		7000
Cash flows from financing activities
Reissue of common shares	-10000
Payment of cash dividends	-5000
Payment of bank loan	-14000
Net cash flows from financing activities		-29000
Net increase in cash		-15000
Cash at beginning of year		15000
Cash at end of year		0