PLease answer it step by step and explain with details . The following comparati

Question

PLease answer it step by step and explain with details .

The following comparative statements of financial position and income statement are for the business of Cheap As Ltd CHEAP AS LTD Balance Sheet as at 30 Jn 017 2018 ASSETS Cash Accounts receivable Invesory Plant and equipment Acc. Depreciation-Plant&Equi; S 37 200 33 600 30 000 72 000 (26 400) 146 400 $ 23 600 16 800 42 000 93 600 28 800) 147 200 LIABILITIES AND EQUITY Accounts payable Current tax liability Loan payable Share capital Retained earnings 32 400 6 000 32 400 41 600 34 000 s 27 600 9 600 37 200 41 600 31 200 CHEAP AS LTD Income Statement For the year ended 30 Jwwe 2018 Sales Cost of sales GROSS PROFIT Selling expenses Administrative expenses Interest expense Profit belore tax $270 000 215 000 55 000 $16 800 9 600 1.200 c tax expense NET PROFITIT 27 400 5200 Additional Information Dividends declared and paid were $25 000. Depreciation expense is inchaded as a selling expense in the income statement All sales and purchases are on credit Required: Prepare a Statement of cash flows using the indirect method 21Page (15 marks) b What informatioa does the cash flow statement provide that is not available from the Sheet or the Income Statement.

Explanation / Answer

Cash outflow are shown with a negative sign.

b. Income statement and balance sheet are made on accrual basis. Cashflow provides information about liquidity of the company. It gives information about cash from operating cash flow, capital expenditure and financing transactions. It helps us detemine the firm's abitility to change cashflow in future. Cashflow measeures how much cash is generated and spent by the business during a given period of time.

Cheap AS Ltd Cash Flow Statement as at 30 June Cashflow from Operating Activities Net Income 22200 Depreciation (28800-26400) 2400 Decrease in Accounts Receivable 16800 Increase in Inventory -12000 Decrease in Accounts Payable -4800 Increase in Current Tax Liability 3600 Net Cash Flow from Operating Activities (a) 28200 Cashflow from Investing Activties Purchase of Equipment -21600 Net Cashflow from Investing Activties (b) -21600 Cashflow from Financing Activites Loan taken from bank 4800 Dividends paid -25000 Net Cashflow from Financing Activites (c) -20200 Net Cashflow (d=a+b+c) -13600 Opening Cash balance (e) 37200 Closing Cash Balance (d+e) 23600

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