Bulls Ltd. has a December 31 fiscal year-end, and the controller of the company is currently completing the financial statements of the company in order to present them at the next board meeting. He completed most of the work, but did not get around to finishing the cash flow statement. He gives you the following financial information in order for you to help him with the preparation of the cash flows.
Balance sheet
2010
2009
Cash
£ 38,500
£ 8,000
Accounts receivable, net
20,000
29,500
Merchandise inventory
37,000
38,000
Prepaid Insurance
9,500
15,000
Land
54,500
40,600
Equipment, at cost
104,500
90,700
Less: Accumulated amortisation
(30,500)
(15,500)
Patent
49,000
53,200
Total assets
£ 282,500
£ 259,500
Accounts payable
£ 58,500
£ 42,000
Income taxes payable
16,500
11,500
Advertising payable
5,000
Dividends payable
40,000
10,000
Notes payable
40,000
83,000
Share capital
93,000
78,500
Retained earnings
29,500
34,500
Total liabilities and shareholders equity
£ 282,500
£ 259,500
Sales
£ 1,090,000
Cost of goods sold
672,000
Gross profit
418,000
Operating expense
Salaries expense
195,000
Advertising expense
35,000
Rent expense
67,500
Insurance expense
34,500
Amortisation expense
25,000
Total operating expenses
357,000
Income from operations
61,000
Interest expense
2,500
Gain on sale of equipment
7,500
Income before income taxes
66,000
Income tax expense
4,000
Net income
£ 62,000
Additional information:
1. Bulls Ltd. purchased equipment of £36,300 in cash during the year.
2. Bulls Ltd. sold equipment for cash during the year.
3. No patent has been purchased nor sold in the year.
4. Accounts payable relates solely to transactions with suppliers for inventory.
Complete the following:
1. Prepare a complete cash flow statement using the indirect method for the 2010 fiscal year.
2. Compute the following amounts:
1. Cash collected from clients during the year
2. Cash paid for advertising expense
3. Cash paid to suppliers for inventory