Homework answers / question archive / Exercise 1 (75 points) Below is the financial statement information for the company Coffee Ltd

Exercise 1 (75 points) Below is the financial statement information for the company Coffee Ltd

Accounting

Share With

Exercise 1 (75 points) Below is the financial statement information for the company Coffee Ltd. 2021 2020 STMT. OF FINANCIAL POSITION Assets Equipment Accumulated depreciation - equipment Land Prepaid expenses Inventory Accounts receivable Cash Total Equity and Liabilities Share capital - ordinary (EUR 1 par) Retained earnings Bonds payable Accounts payable Accrued expenses payable Total € 269 500 -€ 49 000 € 140 000 € 29 300 € 112 500 € 101 300 € 124 550 € 728 150 € 242 500 - €52 000 € 150 000 € 25 400 € 102 850 € 35 000 € 48 400 € 552 150 € 230 000 € 215 750 € 148 000 € 115 400 € 19 000 € 728 150 € 185 000 € 105 450 € 177 400 € 67 300 € 17 000 € 552 150 2021 € 362 900 € 3 000 € 365 900 € 120 460 INCOME STATEMENT Sales Revenue Gain on disposal of plant assets Less: Cost of goods sold Operating expenses, excluding depreciation Depreciation expense Income tax expense Interest expense Net income € 17 410 € 48 000 € 30 000 € 4 730 € 220 600 € 145 300 Additional information: 1. Net equipment costing €90,000 was paid in cash. 2. Old equipment which has an original cost of €63,000 and accumulated depreciation of €51,000 was sold for €15,000 cash. 3. Bonds payable matured and were paid off at face value for cash. 5. A cash dividend of €35,000 was declared and paid in cash. 6. Land was sold for its book value. Instructions a) Prepare a statement of cash flows for 2021 using the indirect method. b) Which of the following statements is wrong: "If old equipment was instead sold for €20,000, then it follows that..." i. ii. iii. iv. Cash holdings would increase by an additional €5,000. Net income would increase to €150,300. Operating cash flow would increase to €165,500. Investing cash flow would increase to - €60,000. Hint: To keep things simple, assume that the gain on disposal is tax-free.