The Following Information Is Produced on an Accrual Basis and Relates

question 32

Essay

The following information is produced on an accrual basis and relates to Emily's Superior Photo Framers.
Statement of comprehensive mcome for the
year ended 31 December 2018 $\begin{array}{lll}\text { Income}&\$80,880\\\text { Less Photo framing supplies used}&14,500\\&66,380\end{array}$
Less Other Expenses
$\begin{array}{ll}\text { Advertising } & \$ 250 \\\text { Salaries } & 18250 \\\text { Vehicle expenses } & 5300 \\\text { Office expenses } & 3500 \\\text { Rent of premises } & 20000 \\\text { Interest expenses } & 2000 \\\text { Depreciation of equipment } & 3600&52,900\\\text { Profit }&&\$13,480\end{array}$ Statement of financial position as at 31 December 2018
$\begin{array}{lll}&2017&&2018\\\text { Cunrent Assets } & \$ && \$ \\\text { Cash at bank } & 20500 && 4030 \\\text { Accounts receivable } & 1500 && 1650 \\\text { Stock of photo framing supplies } & 5500 && 3500\\&27,500&&9,180\\\text { Fixed Assets } & \\\text { Photo Framing Equipment } & 55700 &&65,000\\\text { Less Accumulated Depreciation } & 11200&44,500&14,800&50,200\\&&\$72,000&&\$59,380\end{array}$ Current Liabilities
$$\begin{array} { l l } \text { Creditor owed for vehicle expenses } & - &1900\\\text { Long Term Liabilities } & \\\text { Loan Finance Co, repayable by 2020 } &18,000&15,000\\&18,000&16,900\end{array}$$ Equity
$\begin{array}{lll}\text { Capital - Emily } & 34,000 & 34,000 \\\text { Current account Emily } & \underline{20,000} & \underline{8,480} \\& 54,000 & 42,480\\&\$72,000&\$59,380\end{array}$ Additional Information:
• Emily withdrew $25 000 through the year for her own use.
• No photo framing equipment was sold during the year.
REQUIRED:
a)Prepare a classified statement of cash flows for the year ended 31 December 2018 from the above information. Show all workings.
b)Prepare a statement reconciling profit with cash flow from operating activities.
c)Comment on what the statement of cash flows reveals about the cash situation of Emily's Superior Photo Framers.
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Definitions:

Least Squares Estimate

A method in statistics for estimating the best-fitting line through a set of points by minimizing the sum of the squares of the differences between observed and estimated values.

Y-intercept

The point where a line crosses the Y-axis of a graph, representing the value of the dependent variable when all independent variables are set to zero.

Critical Value Approach

A method in hypothesis testing that involves comparing the test statistic to pre-determined values to decide whether to reject the null hypothesis.

Model Significant

A measure of the likelihood that the relationships observed in the data occur due to something other than chance.