Question

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

Cash flow from Operating Activities

Cash Receipts from customers (1) 315000

Cash Payments to Suppliers (2) (70000)

Interest Paid (2000)

Income Tax Paid (30000)

Operating expenses (58000)

Net cash flow fromOperating activities = 155000

1
Cash collected from customers
	Particulars	Amount ($)
	Sales	345000
Less:	Increase in Account Receivables	30000
	Cash collected from customers	315000
2
Cash Payments to Suppliers
	Particulars	Amount ($)
	Cost of goods sold	120000
Less:	Decrease in Inventory	30000
	Purchases	90000
Less:	Increase in Account Payables	20000
	Cash paid to suppliers	70000