Question: Comparative statement of financial position
Comparative statement of financial position accounts of Secada Inc., which follows IFRS, follow
Additional information:
Secada Inc. has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities.
1. Cash dividends declared during the year were $25,375.
2. A 20% stock dividend was declared during the year and $25,000 of retained earnings was capitalized.
3. FV-NI investments that cost $20,000 and had a fair value at December 31, 2016 of $24,750 were sold during the year for $23,750.
4. Machinery that cost $3,750 and had $750 of depreciation accumulated was sold for $2,200.
Secada’s 2017 statement of income is as follows:
Instructions:
(a) Calculate net cash flow from operating activities using the direct method.
(b) Prepare a statement of cash flows using the indirect method.
(c) Assume that your investment club is considering investing in Secada Inc. Write a memo to the other members of the club about the company’s cash activities during 2017.
Transcribed Image Text:
SECADA INC. Comparative Statement of Financial Position Accounts December 31, 2017 and 2016 Debit accounts 2017 2016 $ 37,000 67,500 30,000 23,250 30,000 67,500 7,500 $262,750 $ 33,750 60,000 24,000 40,500 18,750 56,250 7,500 $240,750 Cash Accounts receivable Merchandise inventory Long-term FV-NI investments Machinery Buildings Land Credit accounts $ 2,250 5,625 13,500 30,000 2,375 1,000 26,000 150,000 32,000 $ 1,500 2,250 9,000 24,750 1,125 1,500 31,000 125,000 44,625 Allowance for doubtful accounts Accumulated depreciation-machinery Accumulated depreciation-buildings Accounts payable Accrued liabilities Income taxes payable Long-term note payable-non-trade Common shares Retained earnings $262,750 $240,750 $640,000 380,000 Sales revenue Less cost of goods sold Gross margin Less: Operating expenses (includes $8,625 depreciation and $5,400 bad debts) Income from operations Loss on sale of FV-NI investments 260,000 180,450 79,550 Interest expense Loss on sale of machinery $(1,000) (3,000) (800) (4,800) Income before tax Income tax expense Net income 74,750 37,000 $ 37,750
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