Data for Rajesh Ltd. are presented in P17.7. Further analysis reveals the following.
1. Accounts payable pertain to merchandise suppliers.
2. All operating expenses except for depreciation were paid in cash.
3. All depreciation expense is in the operating expenses.
4. All sales and purchases are on account.

Instructions
a. Prepare a statement of cash flows for Rajesh using the direct method.
b. Compute free cash flow.

Data From Problem 8

Presented below are the financial statements of Rajesh Ltd.

                                    Rajesh Ltd.
                            Income Statement
            For the Year Ended December 31, 2020

Sales revenue................................................£242,000
Cost of goods sold .........................................175,000
Gross profit .......................................................67,000
Operating expenses ........................................24,000
Income from operations .................................43,000
Interest expense ................................................3,000
Income before income taxes ..........................40,000
Income tax expense ...........................................8,000
Net income .....................................................£ 32,000

Additional data:
1. Depreciation expense is £13,300.
2. Dividends declared and paid were £20,000.
3. During the year, equipment was sold for £9,700 cash. This equipment cost £18,000 originally and had accumulated depreciation of £8,300 at the time of sale.

Transcribed Image Text:

Rajesh Ltd. Comparative Statements of Financial Position December 31 Assets 2020 2019 £ 60,000 £ 78,000 Equipment Accumulated depreciation-equipment Inventory (29,000) 30,000 33,000 37,000 (24,000) 20,000 Accounts receivable 14,000 20,000 Cash Total £131,000 £108,000 Equity and Liabilities £ 18,000 £ 14,000 Share capital-ordinary Retained earnings Bonds payable Accounts payable Income taxes payable Total 50,000 38,000 33,000 27,000 29,000 15,000 7,000 8,000 £131,000 £108,000