Question

Question 4                                                                                                             [15 marks]

Lunar Company (Pty) Ltd‘s balance sheets for the last two years are provided below

Balance Sheets Cash	2013 R 82,000	2012 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 L/T Notes Payable	R100,000 100,000	R 80,000 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 Depreciation Expense

58,000

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

Lunar Company

Statement of Cash Flows

For the year ended December 31, 2013

	R	R
Cash Flows from Operating Activities
Cash collected from customers	315,000
Cash paid to suppliers of merchandise	(70,000)
Cash paid for operating expenses	(58,000)
Cash paid for income tax	(30,000)
Net cash flows from Operating Activities		157,000
Cash Flows from Investing Activities
Proceeds from sale of equipment	57,000
Cash paid for acquiring equipment	(120,000)
Net cash used in Investing Activities		(63,000)
Cash Flows from Financing Activities
Proceeds from L/T Note Payable	50,000
Interest paid	(2,000)
Cash dividends paid	(100,000)
Net cash used in Financing Activities		(52,000)
Net increase in cash		42,000
Cash, December 31 2012		40,000
Cash, December 31 2013		82,000