QUESTION 1 The statement of profit or loss for Kosinski Manu

QUESTION 1

The statement of profit or loss for Kosinski Manufacturing Ltd contains the following condensed information: KOSINSKI MANUFACTURING LTD Statement of profit or loss for the year ended 31 December 2016 $6 583 o00 Revenues Cost of sales Operating expenses, excluding depreciation Depreciation expense Loss on sale of machinery Profit before income tax Income tax expense Profit $4 000 00o 893 000 880 000 27 000 5800 000 783 000 353 000 $430 000 Machinery was purchased at a cost of $750 000. The following balances are reported on Kosinski\'s 2016 statement of financial position at 31 December: 2016 2015 Cash Accounts receivable Inventories Accounts payable Provision for warranty Machinery Accumulated depreciation Loan payable Share capital Retained earnings $672 000 775 000 834 000 521 000 103 000 3 020 000 1647 00o 1 200 000 1500 000 330 000 $130 000 610 000 867 000 501 000 106 000 2 400 oo0 800 000 1000 000 1500 000 100 000 REQUIRED a. Prepare the statement of cash flows using the direct methood. b. Prepare the reconciliation of profit and cash provided by operating activities.

Solution

Statement of cash flows: Cash flows from operating activities: Cash received from customer (6583000+610000-775000) 6418000 Cash paid for inventory -3947000 (4000000+834000-867000+501000-521000) Cash paid for operating expense (893000+106000-103000) -896000 Income tax paid -353000 Net cash provided from operating activities 1222000 Cash flows from investing activities: Purchase of machine -750000 Sale of machinery (130000-33000-27000) 70000 Net cash used in investing activities -680000 Cash flows from Financing activities: Borrowings from loans 200000 Dividend paid (100000+430000-330000) -200000 Net cash provided from financing activities 0 Net increase in cash 542000 Beginning balance of cash 130000 Ending balance of cash 672000 Reconicliation of profits to cash: Nnet income 430000 Adjustment Depreciation 880000 Loss on sale of machine 27000 Increase in accounts receivable -165000 Decrease in inventory 33000 Increase in accounts payable 20000 Decrease in Provision for warranty -3000 Net cash provided from operating activities 1222000