Question

As the accountant for MM Group your duties include preparing the Statement of Cash Flows from the information provided below. MM Group
Comparative Statements of Financial Position
As at June 30
2018		2017
Cash	55,000		45,000
Accounts Receivable	100,000		82,000
Prepaid Expenses	10,000		8,000
Inventory	65,000		60,000
Equity Investments (non-trading)	70,000		80,000
Equipment	50,000		40,000
Building	300,000		300,000
Land	80,000		40,000
730,000		655,000
Allowance for Doubtful Accounts	14,000		12,000
Accumulated Depreciation-Equipment	15,000		10,000
Accumulated Depreciation-Building	33,000		30,000
Accounts Payable	70,000		75,000
Income Tax Payable	12,000		10,000
Long term Notes Payable	60,000		70,000
Share Capital Ordinary	440,000		350,000
Retained Earnings	86,000		98,000
730,000		655,000

MM Group
Income Statement
For the period ended June 30, 2018
		$
Sales Revenue		1,000,000
Less Cost of Goods sold		600,000
Gross Profit		400,000
Less Operating expenses (including bad debts and depreciation)		300,000                                                                      100,000
Income from Operations
Other income and Expenses
Gain on sale of investments		10,000
Loss on sale of equipment	(2,000)		8,000
108,000
Less Income before taxes		48,000
Net Income		60,000

Additional data:

1. Equipment that cost 10,000 and was 50% depreciated at the time of disposal was sold for $3,000.

2. Ordinary shares were issued in exchange for land.

3. Equity investments which cost 30,000 were sold.

4. Uncollectible accounts valued at $2,000 were written off during the year.

5. Cash dividends were declared and paid during the year.

The company prepares its Statement of Cash Flows using the direct method.

Required:

d) Cash paid for income tax

e) Prepare the Operating Activities section of the Statement of Cash Flows in good style.

Answer 1

Req d:
Income tax paid:
Income tax provided during the year				48000
Add: Income tax payable in beginning				10000
Less: Income tax payable at end				12000
Taxes paid				46000
Req e:
Casshflows from Operating activities:
Collections from Customers (1000000+82000-100000-2000)						980000
Cash paid for suppliers (600000+65000-60000+75000-70000)						-610000
Cash paid for operating expenses (300000-8000-4000+10000-8000)						-290000
Taxes paid (48000+10000-12000)						-46000
Net cash provided from Operating activities						34000