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Assignment On Statement of Cash Flows

The document outlines the financial statements for Elm Inc. at the end of 2020, including the Statement of Financial Position and Income Statement. It provides detailed figures for assets, liabilities, and shareholders' equity, alongside revenue, expenses, and net income. Additionally, it includes requirements for cash flow analysis using both the indirect and direct methods, as well as a brief explanation of the differences between these methods.

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Zhijun Zhang
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19 views2 pages

Assignment On Statement of Cash Flows

The document outlines the financial statements for Elm Inc. at the end of 2020, including the Statement of Financial Position and Income Statement. It provides detailed figures for assets, liabilities, and shareholders' equity, alongside revenue, expenses, and net income. Additionally, it includes requirements for cash flow analysis using both the indirect and direct methods, as well as a brief explanation of the differences between these methods.

Uploaded by

Zhijun Zhang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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BUSI 293

Assignment on the Statement of Cash Flows

The following financial statement information is available for Elm Inc. at the end of 2020:

Elm Inc.
Statement of Financial Position
As at December 31st

2020 2019
Assets
Cash $156,000 $135,000
Accounts receivable (net) 210,000 236,000
Inventory 185,000 140,000
Prepaid Insurance 11,500 9,000
Total current assets 562,500 520,000
Property, plant & equipment 1,820,000 1,600,000
Accumulated depreciation (1,060,000) (960,000)
Total assets $1,322,500 $1,160,000

Liabilities
Accounts payable $160,000 $148,000
Other accrued liabilities 72,000 58,000
Income taxes payable 24,000 20,000
Total current liabilities 256,000 226,000
Long-term debt 600,000 625,000
Total liabilities $856,000 $851,000

Shareholders’ Equity
Common shares $170,000 $110,000
Retained earnings 296,500 199,000
Total shareholder equity $466,500 $309,000
Total liabilities and shareholders’ equity $1,322,500 $1,160,000
Elm Inc.
Income Statement
Year ended December 31, 2020
Revenue $1,912,000
Cost of goods sold 1,109,000
Gross margin 803,000
Operating expenses 521,000
Operating income 282,000
Non-operating items:
Interest expense $30,000
Loss on sale of equipment 12,000
Total non-operating items 42,000
Income before tax expense 240,000
Tax expense 47,500
Net income $192,500

Additional information

1. The equipment sold in 2020 had an original cost of 60,000.


2. Depreciation expense of $120,000 is included in operating expenses.
3. The company declared and issued a stock dividend of $35,000 during the year. The only other
transactions affecting retained earnings related to net income and cash dividends.

Required:

1. Using the indirect method, provide a summary of cash flows from each activity and reconcile
the cash account. Please show all work. (15 marks)

2. Briefly describe the difference between calculating cash from or for operating activities
under the direct method as opposed to the indirect method. Determine the cash receipts
from customers and the cash paid for inventory under the direct method. (5 marks)

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