Income Statement Of Hongha Ltd Paper Homework Help
Income Statement Of Hongha Ltd Paper Homework Help
Presented below is the income statement of Hongha Ltd for the year ended 31 Dec 2020:
Sales $380,000
Cost of goods sold 225,000
Gross profit $155,000
Operating expenses 85,000
Income before income taxes 70,000
Income taxes 28,000
Net income $ 42,000
In addition, the following information related to net changes in working capital is
presented:
| ALL in $ | 31 Dec 2019 | 31 Dec 2020 | Changes |
| Accounts receivable | 20,000 | 35,000 | Increased by 15,000 |
| Inventories | 31,000 | 11,600 | Decreased by 19,400 |
| Salaries payable (operating expenses) |
12,000 | 4,000 | Decreased by 8,000 |
| Accounts payable | 8,500 | 20,500 | Increased by 12,000 |
| Income tax payable | 31,000 | 28,000 | Decreased by 3,000 |
The company also indicates that depreciation expense for the year was $16,700.
Required:
a) Prepare a schedule computing the net cash flow from operating activities that
would be shown on a statement of cash flows using the indirect method. (show all
your workings) (8 marks)
b) Explain the difference between net income and net cash flows from operating
activities. (2 marks)
c) Assume you are the manager of business. Is the statement of cash flows necessary
for you? Why? (10 marks)
d) Which method (direct method or indirect method) do you prefer to prepare cash
flows statement? Why? (10 marks)
Income Statement Of Hongha Ltd Paper Homework Help
Presented below is the income statement of Hongha Ltd for the year ended 31 Dec 2020:
Sales $380,000
Cost of goods sold 225,000
Gross profit $155,000
Operating expenses 85,000
Income before income taxes 70,000
Income taxes 28,000
Net income $ 42,000
In addition, the following information related to net changes in working capital is
presented:
| ALL in $ | 31 Dec 2019 | 31 Dec 2020 | Changes |
| Accounts receivable | 20,000 | 35,000 | Increased by 15,000 |
| Inventories | 31,000 | 11,600 | Decreased by 19,400 |
| Salaries payable (operating expenses) |
12,000 | 4,000 | Decreased by 8,000 |
| Accounts payable | 8,500 | 20,500 | Increased by 12,000 |
| Income tax payable | 31,000 | 28,000 | Decreased by 3,000 |
The company also indicates that depreciation expense for the year was $16,700.
Required:
a) Prepare a schedule computing the net cash flow from operating activities that
would be shown on a statement of cash flows using the indirect method. (show all
your workings) (8 marks)
b) Explain the difference between net income and net cash flows from operating
activities. (2 marks)
c) Assume you are the manager of business. Is the statement of cash flows necessary
for you? Why? (10 marks)
d) Which method (direct method or indirect method) do you prefer to prepare cash
flows statement? Why? (10 marks)