Question

PSB11.4 Here are the financial statements of Kiwi Ltd.

KIWI LTD
Statement of financial position
as at 31 December 2015

		2015		2014
Assets
Cash		$33 800		$42 900
Accounts receivable		36 400		18 200
Inventory		49 400		32 500
Property, plant, and equipment	$91 000		$101 400
Less: Accumulated depreciation	(35 100)	55 900	(31 200)	70 200
Total		$175 500		$163 800
Liabilities and equity
Accounts payable		$40 300		$55 900
Income tax payable		33 800		26 000
Bonds payable		26 000		13 000
Contributed equity		32 500		32 500
Retained earnings		42 900		36 400
Total		$175 500		$163 800

KIWI LTD
Statement of profit or loss
for the year ended 31 December 2015

Sales		$371 800
Cost of sales		252 200
Gross profit		119 600
Selling expenses	$36 400
Administrative expenses	11 700
Interest expense	9 100	57 200
Profit before income taxes		62 400
Income tax expenses		9 100
Profit		$53 300

Additional information:

Dividends were declared and paid.

During the year equipment was sold for $13 000 cash. This equipment cost $19 500 originally and had a book value of $13 000 at the time of sale.

All depreciation expense, $10 400, is in the selling expense category.

All sales and purchases are on account.

Additional equipment was purchased for cash.

Accounts payable pertains to merchandise creditors.

All operating expenses except for depreciation are paid in cash.

Required

Prepare a reconciliation between profit and cash provided by operating activities.
(Note: This is also the indirect method of calculating operating activity cash flows.)

Answer 1

Solution:

Statement of Cash Flows (Partial) - KIWI Ltd For the year ended December 31, 2015
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income		$53,300.00
Adjustments to reconcile net income to cash flow from operating activities:
Depreciation	$10,400.00
Increase in Accounts Receivables ($36400 - $18200)	-$18,200.00
Increase in Inventory ($49400 - $32500)	-$16,900.00
Decrease in Accounts payable ($55900 - $40300)	-$15,600.00
Increase in Income tax payable ($33,800 - $26,000)	$7,800.00
Total Adjustments		-$32,500.00
Net Cash Flow From Operating Activites (A)		$20,800.00