Question 3 Watson is a sole trader. He provides the following financial information in respect of his business. Income statement for the year ended 31 December 2012 $000 Sales 3380 Cost of sales Expenses Profit for the year (2000) (1200) 180 Statements of financial position at: 31 December 31 December 2011 2012 $00 $000 $00 $000 Non-current assets Freehold land Plant and machinery at cost Less: depreciation 2000 3500 900 1020 (500) (470) Net book value 400 2400 550 4050 Current assets Inventory Trade receivables Cash and cash equivalents 310 320 240 210 10 560 530 Current liabilities Trade payables 200 160 Bank overdraft 530 200 690 Non-current liability – loan 500 350 Net assets 2260 3540 Additional information 4. Drawing is $400 5. During the year Winston purchased new plant at a cost of $200 000. He also sold some plant that had a net book value of $20 000 and had been depreciated by $60 000. This resulted in a loss on disposal of $2000. REQUIRED (a) Prepare a statement of cash flows for the year ended 3 er 20

Question 3 Watson is a sole trader. He provides the following financial information in respect of his business. Income statement for the year ended 31 December 2012 $000 Sales 3380 Cost of sales Expenses Profit for the year (2000) (1200) 180 Statements of financial position at: 31 December 31 December 2011 2012 $00 $000 $00 $000 Non-current assets Freehold land Plant and machinery at cost Less: depreciation 2000 3500 900 1020 (500) (470) Net book value 400 2400 550 4050 Current assets Inventory Trade receivables Cash and cash equivalents 310 320 240 210 10 560 530 Current liabilities Trade payables 200 160 Bank overdraft 530 200 690 Non-current liability – loan 500 350 Net assets 2260 3540 Additional information 4. Drawing is $400 5. During the year Winston purchased new plant at a cost of $200 000. He also sold some plant that had a net book value of $20 000 and had been depreciated by $60 000. This resulted in a loss on disposal of $2000. REQUIRED (a) Prepare a statement of cash flows for the year ended 3 er 20

Name: Question 3Watson is a sole trader. He provides the following financia
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Description: Question 3Watson is a sole trader. He provides the following financial information inrespect of his business.Income statement for the year ended 31 December 2012$000Sales3380Cost of salesExpensesProfit for the year(2000)(1200)180Statements of financ

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 08-48 (Algo) [LO 8-1, 8-7, 8-8] Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance sheet showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 37,750 143,200 Net cash flow 50,750 (40,600) 22,000 (4,400) Required: The purchaser paid a lump-sum price of $316,000 cash for the business. The sales contract stipulates that the FMV of the business Inventory is $156,400, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.
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