Question

The condensed financial data of Freshest Farmers Ltd follow.

FRESHEST FARMERS LTD
Statement of financial position
as at 31 March 2016

	2016	2015
Assets
Cash	$147 000	$57 600
Accounts receivable	136 200	49 500
Inventories	168 750	154 275
Prepaid expenses	27 600	24 000
Investments	162 000	141 000
Plant and machinery	405 000	363 750
Accumulated depreciation	(75 000)	(78 000))
Total	$971 550	$712 125
Liabilities and equity
Accounts payable	$138 000	$100 950
Accrued expenses payable	25 050	25 500
Debentures payable	127 500	150 000
Share capital	330 000	277 500
Retained earnings	351 000	158 175
Total	$971 550	$712 125

FRESHEST FARMERS LTD
Statement of profit or loss
for the year ended 31 March 2016

Sales		$513 000
Less:
Cost of sales	$173 190
Operating expenses, excluding depreciation	18 615
Depreciation expense	69 750
Income tax	10 500
Interest expense	3 345
Loss on sale of machinery	11 250	286 650
Profit		$226 350

Additional information:

New machinery costing $127 500 was purchased for cash during the year.

Old machinery having an original cost of $86 250 was sold for $2250 cash.

Debentures matured and were paid off at face value for cash.

A cash dividend of $33 525 was declared and paid during the year.

Accounts payable pertain to inventory creditors.

Required

Prepare a statement of cash flows for Freshest Farmers Ltd, using the direct method for operating cash flows.

Answer 1

Solution:

Computation of cash received from customers
Particulars	Amount
Beginning accounts receivables	$49,500.00
Add: Sales	$513,000.00
Less: Ending accounts receivables	$136,200.00
Cash received from customers	$426,300.00

Computation of cash paid for inventory
Particulars	Amount
Cost of Goods Sold	$173,190.00
Add: Ending inventory	$168,750.00
Less: Beginning inventory	$154,275.00
Purchases made during the year	$187,665.00
Add: Opening accounts payable	$100,950.00
Less: Ending accounts payable	$138,000.00
Cash paid for inventory	$150,615.00

Computation of cash paid for Operating Expenses
Particulars	Amount
Operating expenses	$18,615.00
Add: Ending Prepaid expense	$27,600.00
Less: Beginning prepaid expense	$24,000.00
Add: Opening accrued expenses payable	$25,500.00
Less: ending accrued expenses payable	$25,050.00
Cash paid for operating expenses	$22,665.00

FRESHEST FARMERS LTD
Statement of Cash Flows
For Year Ended March 31, 2016
Particulars	Details	Amount
Cash Flows from operating activities:
Cash received from customers	$426,300.00
Cash paid for inventory	-$150,615.00
Cash paid for operating expenses	-$22,665.00
Cash Paid for income taxes	-$10,500.00
Cash Paid for Interest	-$3,345.00
Net Cash provided by operating activities		$239,175.00
Cash flow from investing activities:
Cash received from sale of Machinery	$2,250.00
Cash paid for Machinery purchase	-$127,500.00
Cash paid for purchase of investment	-$21,000.00
Net Cash used in investing activities		-$146,250.00
Cash flow from financing activities:
Redemption of debantures	-$22,500.00
Cash paid for dividends	-$33,525.00
Cash received from issuing stock	$52,500.00
Net Cash used in financing activities		-$3,525.00
Net Increase (Decrease) in Cash		$89,400.00
Cash balance at beginning of year		$57,600.00
Cash balance at end of year		$147,000.00