Comparative partial balance sheet	Income statement
Details	2019	2020	Sales	250,000
cash	48,000	54,000	Deduct: cost of goods sold	(100,000)
Account Receivable	68,000	60,000	Gross Profit	150,000
Inventory	112,000	110,000	Deduct: Administrative and selling expenses (including 15,000 dinars depreciation of equipment)	(68,000)
Prepaid Expenses	8,000	10,000
Long-term Investment	60,000	62,000	Income from operations	82,000
equipment	127,000	181,000	Gains from equipment sales are added	7,000
loan bonds	30,000	27,000	Deduct:  Interest Expense	(9,000)
Account Payable	87,000	75,000	net income before tax	80,000
checks	8,000	12,000	Subtract: income tax (20%)	(16,000)
Income tax payable	9,000	8,000	net income	64000

 

 

additional information:

1- Accounts receivable relate to sales, creditors’ accounts relate to the cost of goods sold, prepaid expenses relate to administrative and selling expenses, and the total depreciation of property and equipment is (15,000) dinars.

2- The Manama Company had sold equipment costing (17,500) dinars and its depreciation complex (12,000) dinars for (12,500) dinars, and interest banks for this year at 5% for a long-term loan amounting to (180,000) dinars.

Required:

First: Use your specialized skills to apply accounting principles. Help the management of Al-Manama Trading Company in preparing the statement of cash flows according to the direct method, explaining to it how to extract the amounts.

Second: The direct method for preparing the statement of cash flows differs from the indirect method. Required: Using your critical skill in solving problems related to measurement, recognition, and disclosure of elements of financial statements. Compare only the differences between the methods of preparing the statement of cash flows.

 

Third: The cash flow statement provides businessmen with the opportunity to assess the profitability of the company. Required: Using your critical skill in showing insight and interpretation in solving problems, evaluate the profitability of Al-Manama Trading Company and its ability to meet its obligations to investors and creditors according to what is reflected in the company's cash flow statement and compare it with the industry standard of profitability, which is (98%).

Answer rating: 100% (QA)

Step 1 Cash flow Statement The purpose of preparing the cash flow statement is to know the movement of cash flow in the entity for a specific period of time Cash flow statement has mainly three compon... View the full answer