The CEO was puzzled that despite a net profit of $198,750, the bank accountdecreased from $205,670 on 1 October 2017 to $113,670 on 30 September 2018.Examine and explain the main causes and comment on the company's cash level to the CEO. Always Fresh Pte Ltd is an importer and distributor of fresh fruits and vegetables inSingapore.The following is the Statement of Cash Flows of Always Fresh Pte Ltd for the financialyear ended 30 Seplember 2018.Always Fresh Pte LtdStatement of Cash Flows (Indirect Method)For Year Ended 30 September 2018Cash flows from operating activitiesProfit before tax198,750Adjustments to reconcile profit to net cash provided byoperating activitiesDepreciation expenses42,000(19,000)(10,500)(119,500)Increase in accounts receivableDecrease in accounts payableIncrease in inventoriesCash generated from operating activitiesIncome tax paidNet cash from operating activitiesCash flows from investing activitiesCash paid for an energy-saving refrigeration system*Net cash used in investing activitiesCash flows from financing activitiesRepayment of debtNet cash used in financing activities91,750(33,750)58,000(100,000)(100,000)(50,000)(50,000)(92,000)205,670113,670Net decrease in cashCash balance at 1 October 2017Cash balance at 30 September 2018* The energy-saving refrigeration system is expected to reduce fruit and vegetablespoilages and improve energy efficiency substantially.

Given: Cash Balance at 1 October 2017 = $205,670 Cash Balance at 30 September 2018 = $113,670 CEO is…

Always Fresh Pte Ltd Statement of Cash Flows (Indirect Method) For Year Ended 30 September 2018 Cash flows from operating activities Profit before tax 198,750 Adjustments to reconcile profit to net cash provided by operating activities Depreciation expenses 42,000 Increase in accounts receivable (19,000) (10,500) Decrease in accounts payable Increase in inventories |(119,500) 91,750 Cash generated from operating activities Income tax paid Net cash from operating activities Cash flows from investing activities Cash paid for an energy-saving refrigeration system* Net cash used in investing activities Cash flows from financing activities Repayment of debt Net cash used in financing activities (33,750) 58,000 (100,000) (100,000) (50,000) (50,000) (92,000) 205,670 Net decrease in cash Cash balance at 1 October 2017 Cash balance at 30 September 2018 113,670 * The energy-saving refrigeration system is expected to reduce fruit and vegetable spoilages and improve energy efficiency substantially.

Always Fresh Pte Ltd Statement of Cash Flows (Indirect Method) For Year Ended 30 September 2018 Cash flows from operating activities Profit before tax 198,750 Adjustments to reconcile profit to net cash provided by operating activities Depreciation expenses 42,000 Increase in accounts receivable (19,000) (10,500) Decrease in accounts payable Increase in inventories |(119,500) 91,750 Cash generated from operating activities Income tax paid Net cash from operating activities Cash flows from investing activities Cash paid for an energy-saving refrigeration system* Net cash used in investing activities Cash flows from financing activities Repayment of debt Net cash used in financing activities (33,750) 58,000 (100,000) (100,000) (50,000) (50,000) (92,000) 205,670 Net decrease in cash Cash balance at 1 October 2017 Cash balance at 30 September 2018 113,670 * The energy-saving refrigeration system is expected to reduce fruit and vegetable spoilages and improve energy efficiency substantially.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter15: Statement Of Cash Flows

Section: Chapter Questions

Problem 15E

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