The comparative statement of financial position of Novak Corporation as at Decem
ID: 2600408 • Letter: T
Question
The comparative statement of financial position of Novak Corporation as at December 31, 2017, follows: NOVAK CORPORATION Statement of Financial Position December 31 December 31 Assets Cash Accounts receivable Equipment Less: Accumulated depreciation Total 2017 2016 s 51,940 12,740 89,180 86,240 26,460 21,560 (9,800) (10,780) $157,780 $109,760 = Liabilities and Shareholders' Equity Accounts payable Common shares Retained earnings Total $ 19,600 $ 14,700 98,000 78,400 40,180 16,660 $157,780 $109,760 Net income of $36,260 was reported and dividends of $12,740 were declared and paid in 2017. New equipment was purchased, and equipment with a carrying value of $4,900 (cost of $11,760 and accumulated depreciation of $6,860) was sold for $7,840. Prepare a statement of cash flows using the indirect method for cash flows from operating activities. Assume that Novak prepares financial statements in accordance with ASPE. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)Explanation / Answer
Details
Net
Cash Flow from Operating Activities
Net Profit before tax
36,260
Add: Non Cash and Non Operating Expenses
Depreciation
5,880
Less: Non Operating Income
Gain on sale of equipment
(2,940)
Operating profit before Working Capital changes
39,200
Add: Increase in Current Liabilities And decrease in Current Assets
Increase in Accounts Payable
4,900
Less: Decrease in Current Liabilities And Increase in Current Assets
Increase in Accounts Receivable
(2,940)
Cash Flow from Operating Activities (A)
41,160
Cash Flow from Investing Activities
Sale of Equipment
7,840
Purchase of equipment
(16,660)
Cash Used in Investing Activities (B)
(8,820)
Cash Flow from Financing Activities
Issue of Shares
19,600
Dividend Paid
(12,740)
Cash Flow from Financing Activities ( C )
6,860
Increase in Cash Flow (A+B+C)
39,200
Opening Cash
12,740
Closing Cash
51,940
Equipment A/c
In $
In $
To Bal b/d
21,560
By bank
7,840
By acc depreciation
6,860
To cash
16,660
To P&L
2,940
By Bal c/d
26,460
Total
41,160
Total
41,160
Acc. Depreciation A/c
In $
In $
To Equipment
(Old machinery)
6,860
By Bal b/d
10,780
By P&L
5,880
To bal. c/d
9,800
Total
16,660
Total
16,660
Details
Net
Cash Flow from Operating Activities
Net Profit before tax
36,260
Add: Non Cash and Non Operating Expenses
Depreciation
5,880
Less: Non Operating Income
Gain on sale of equipment
(2,940)
Operating profit before Working Capital changes
39,200
Add: Increase in Current Liabilities And decrease in Current Assets
Increase in Accounts Payable
4,900
Less: Decrease in Current Liabilities And Increase in Current Assets
Increase in Accounts Receivable
(2,940)
Cash Flow from Operating Activities (A)
41,160
Cash Flow from Investing Activities
Sale of Equipment
7,840
Purchase of equipment
(16,660)
Cash Used in Investing Activities (B)
(8,820)
Cash Flow from Financing Activities
Issue of Shares
19,600
Dividend Paid
(12,740)
Cash Flow from Financing Activities ( C )
6,860
Increase in Cash Flow (A+B+C)
39,200
Opening Cash
12,740
Closing Cash
51,940