1. Prepare the statement of cash flows from operating activities using the direct method.

2. Present the statement of cash flows from all activities using the indirect method.

3. Explain why there was an increase in cash in spite of the company incurring a net loss of Rs 390,000.

Moonlight Company's balance sheet on March 31, 2019 and 2018 and statement of profit and loss for the year ended March 31, 2019 are as follows: 2018 (Rs) 1,522,500 447,500 1,075,000 172,500 177,500 162,500 Moonlight Company Limited Balance Sheet, March 31 Description 2019 (Rs) Assets Non-current assets Property, plant and equipment, at cost 1,517,500 Less: Accumulated depreciation 507,500 Property, plant and equipment, net 1,010,000 Non-current investments 45,000 Current assets Inventories 190,000 Financial assets Trade receivables (net of allowance for credit losses, 232,500 Rs 0; Rs 0) Cash and cash equivalents 367,500 Other current assets: Prepaid expenses 12,500 Total assets 1,857,500 Equity and Liabilities Equity Equity share capital 537,500 Other equity 47,500 Liabilities Non-current liabilities Financial liabilities Borrowings 975,000 Current liabilities Financial liabilities Trade payables 295,000 Current tax liabilities 2,500 Total equity and liabilities 1,857,500 Moonlight Company Limited Statement of Profit and Loss For the year ended March 31, 2019 172,500 30,000 1,790,000 487,500 437,500 630,000 215,000 20,000 1,790,000 Sales Dividend income (Rs) 2,145,000 22,500 2,500 7,500 2,177,500 Interest income Gain on sale of investments Total income Expenses Cost of goods sold Interest expense Selling and administrative expenses Loss on sale of patent Total expenses Profit before tax Tax expense Profit for the period 2,152,500 107,500 280,000 27,500 2,567,500 (390,000) 0 (390,000) Additional Information: 1. Issued at per equity shares Rs 50,000. 2. Redeemed debentures, Rs 10,000. 3. Purchased machinery for cash, Rs 82,500. 4. Sold a plant for cash, Rs 7,500. (cost, Rs 87,500; accumulated depreciation, Rs 52,500) 5. Issued debentures, Rs 130,000. 6. Sold investments, Rs 135,000 (cost, Rs 127,500). 7. Issued loans, Rs 225,000. 8. Cost of goods sold includes depreciation of Rs 112,500