QKP is a trading business and has been in operation for many years.

Other data given:
(i) The interest expenses and sundry expenses were on cash basis.
(ii) During the financial year QKP sold motor vehicle for $5,000 cash. The original cost was $50,000 and its accumulated depreciation prior to the disposal was $47,000.
QKP bought a fleet of brand-new motor vehicles for $180,000 cash.
(iii) QKP sold office equipment for $1,000 cash. Its original cost was $10,000 and its accumulated depreciation was $8,000.
QKP bought new office equipment for $70,000 cash.

REQUIRED:
(a) Prepare a detailed Cash Flow Statement of QKP for the year ended 31 January 2020.
(b) The owner of QKP could not understand why the net profit was $500,000 but the cash balance increased by $20,000 only. With reference to the cash flow statement you have prepared, explain why this was happening.
QKP has prepared its final accounts as shown below:

 

Transcribed Image Text:

Balance Sheet as at 31 January: | 20 20 2019 Current assets 000.$ 000.$ 380 000.$ 360 000.$ Cash at bank Accounts receivables 118 100 Inventory Prepaid rent 240 220 60 20 798 700 Non-current assets Motor vehicle 430 300 Less: Accumulated depreciation Office equipment Less: Accumulated depreciation (93) 337 (100) 200 340 280 (92) 248 (60) 220 TOTAL ASSETS 1,383 1,120 Current liabilities Salary payable Accounts payable 10 18 480 460 490 478 Non-current liabilities Notes payable 200 (490) 893 TOTAL LIABILITIES (678) NET ASSETS 442 Owner's Equity Beginning capital 442 442 Add: Net Profit 500 200 Less: Drawings (49) (200) Ending capital 893 442 Balance Sheet as at 31 January: | 20 20 2019 Current assets 000.$ 000.$ 380 000.$ 360 000.$ Cash at bank Accounts receivables 118 100 Inventory Prepaid rent 240 220 60 20 798 700 Non-current assets Motor vehicle 430 300 Less: Accumulated depreciation Office equipment Less: Accumulated depreciation (93) 337 (100) 200 340 280 (92) 248 (60) 220 TOTAL ASSETS 1,383 1,120 Current liabilities Salary payable Accounts payable 10 18 480 460 490 478 Non-current liabilities Notes payable 200 (490) 893 TOTAL LIABILITIES (678) NET ASSETS 442 Owner's Equity Beginning capital 442 442 Add: Net Profit 500 200 Less: Drawings (49) (200) Ending capital 893 442

Answer rating: 100% (QA)

Requiredb Net benefit 500000 however increment in real money jus... View the full answer