1. CTUK LLC is a retail company. Use the information below to prepare the company's statement of cash flows for the year ended 12/31/2016 using:
(i) SFAS No. 95
(ii) The flexibility within IAS 7, to produce a relevant and faithfully representative classification of the retail entity's operating, investing and operating cash flows.
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CTUK LLC Balance sheets at December 31
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2015
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2016
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$
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$
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Assets
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Notes
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Cash
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4,200
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25,000
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Inventory
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4,000
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23,000
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Interest receivable
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800
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-
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Accounts receivable (net)
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40,000
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74,000
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Total current assets
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49,000
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122,000
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Property, plant and equipment (net)
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1
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108,000
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78,925
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Lease property rights (capital lease)
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31,700
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23,775
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Total assets
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188,700
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224,700
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Liabilities
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Accounts payable
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53,000
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70,000
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Denture loan interest payable
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2,000
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-
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Debenture bonds payable (net)
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2
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49,500
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49,600
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Capital lease liability
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31,700
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24,870
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Total liabilities
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136,200
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144,470
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Equity
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Common stock
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50,000
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60,000
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Retained earnings
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2,500
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20,230
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Total equity
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52,500
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80,230
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Total liabilities and owners' equity
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188,700
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224,700
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Note 1
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2015
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2016
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$
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$
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Property, plant and equipment (gross)
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180,000
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160,000
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Less accumulated depreciation
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(72,000)
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(81,075)
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Property, plant and equipment (net)
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108,000
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78,925
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Note 2
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2015
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2016
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$
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$
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Debenture bonds payable (8%)
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50,000
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50,000
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Less unamortized discount
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(500)
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(400)
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Debenture bonds payable, net
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49,500
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49,600
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CTUK LLC: Income statement for year ended December 31, 2016
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$
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Revenue
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150,000
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Operating expenses
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Cost of goods sold
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(44,000)
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Depreciation
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(25,000)
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Admin and selling salaries
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(42,000)
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Operating income
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39,000
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Other income and finance costs
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Dividends received
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2,200
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Interest income
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1,000
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Interest expense
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(7,270)
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Gain on disposal of fixed asset
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4,000
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Total other income and finance costs
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(70)
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Income before income taxes
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38,930
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Income tax expense @ 40%
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(15,572)
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Net income
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23,358
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The following additional information is made available:
- The leased property rights and liability relate to a four year lease signed on December 31, 2015. Annual lease payments are $10,000. The first payment was due on December 31, 2016. The effective interest rate implicit in the lease is 10%. The leased property has a fair value of $31,700 and is depreciated on a straight line basis over four years.
- Total depreciation of $25,000 was charged during 2016, including $17,075 on property, plant and equipment (i.e. non-leased assets), and $7,925 on leased property rights.
- A property with a historic cost of $20,000 was sold during 2016, which resulted in a gain on disposal of $4,000 (hint: to find the cash received from this disposal you need to find the property's net book value).
- The 8% 5 year debenture bonds were sold at a discount on December 31, 2015 for $49,500. Straight line amortization is to be used on this discount.
- The interest expense of $7,270 for 2016 includes: $3,170 of interest on the capital lease, $4,000 of debenture loan interest and $100 of bond discount amortization.
- The interest receivable and debenture interest payable in the 2015 balance sheet were caused by checks being delayed in the post. Assume the tax implications of these amounts were dealt with during 2015.
- $2,200 of dividend income was received during 2016.
Dividends of $5,628 were declared and paid to stockholders during 2016.