QUESTION 1

Balance Sheets for Changi Ltd as at 30 June 2020 & 30 June 2021 and Income Statement for the year ended 30 June 2021 are provided below:

Changi Ltd

Balance Sheets as at 30 June

		2021	2020
Assets		$	$
Cash at Bank		56,000	68,000
Accounts Receivable		139,000	121,000
Inventory		41,000	44,000
Land		241,000	241,000
Plant and Machinery		414,000	319,000
Less: Accumulated Depreciation		(89,000)	(10,000)
Total Assets		802,000	783,000
Liabilities
Accounts Payable		54,000	55,000
Tax Payable		23,000	16,000
Loan		362,000	536,000
Total Liabilities		439,000	607,000
Shareholders' Equity
Share Capital		240,000	150,000
Retained Earnings		123,000	26,000
Total Shareholders' Equity		363,000	176,000
Total Liabilities and Shareholders' Equity		802,000	783,000

Changi Ltd

Income Statement for the year ended 30 June 2021

$

Sales

614,000

Less:

Cost of Sales

307,000

Interest Expense

23,000

Other Operating Expenses

91,000

Tax Expense

46,000

Total Expenses

(467,000)

Profit

147,000

Additional Information:

1. New machinery was purchased for cash during the year. No sale of machinery during the year ending 30 June 2021.
2. Interim dividends were declared and paid.
3. Other Operating Expenses include depreciation expense of $79,000.
4. Additional shares were issued for cash during the year ending 30 June 2021.
5. All sales and purchases are on credit throughout the year ending 30 June 2021.
6. Accounts Payable reflects inventory purchases on credit from suppliers.

REQUIRED:

1. Prepare a fully classified Statement of Cash Flows for Changi Ltd for the financial year ended 30 June 2021, using the direct method to present cash flows.
2. Based on the Statement of Cash Flows prepared above, would you be willing to invest money into Changi Ltd? Justify your answer by proving 3 possible reasons.