Question

Question 4 [15 marks]
Lunar Company (Pty) Ltd‘s balance sheets for the last two years are provided below

Balance Sheets               2013                 2012
Cash                              R 82,000           R 40,000
Accounts Receivable         180,000            150,000
Inventory                           170,000            200,000
Equipment                        200,000            140,000
Accum. Depreciation         (72,000)            (60,000)
Total Assets                     R560,000          R470,000

Accounts Payable            R100,000           R 80,000
L/T Notes Payable              100,000              50,000
Ordinary Shares                 250,000             250,000

Retained Earnings              110,000              90,000
Total Liabilities &
Shareholders’ Equity         R560,000         R470,000
The company’s income statement for 2013 is provided below:

Income Statement                                             2013
Sales                                                               R345,000
Expenses:
Cost of Goods Sold                                           R120,000
Operating Expenses                                              58,000
Depreciation Expense                                            20,000
Interest Expense                                                     2,000
                                                                          200,000
Operating Income                                                 145,000
Gain on Sale--Equipment*                                         5,000
Income before Taxes                                             150,000
Tax Expense                                                          30,000
Net Income                                                         R120,000

*The company sold equipment for R57, 000 that had a cost of R60, 000

Required:
Prepare the company’s Statement of Cash flows for 2013. Use the direct method of computing cash flows from operating activities.

Answer 1