90.2K

Verified Solution

Link Copied!

Income Statement of Al Fahdi Company L.L.C. for the year ended 31st December, 2018
	OMR	OMR
Sales Revenue		433000
Less: Cost of goods sold		(289000)
Gross profit		144000
Operating expenses:
Depreciation expenses	29000
Insurance expenses	14400
Other operating expenses	57200
Less: Total operating expenses		(100600)
Operating Income		43400
Other Revenue and (Expenses):
Gain on sale of Land	17500
Add: Total Other Revenue and Expenses		17500
Income before income tax		60900
Less: Income tax expense		(18270)
Net Income		42630
Statement of Financial Position of Al Fahdi Company L.L.C. as on 31st December, 2017 and 2018
	OMR 2018		OMR 2017
Assets
Cash	66700		83250
Accounts receivable	55400		54220
Prepaid insurance	2400		3600
Investments	95000		75000
Plant assets	356000		290000
Accumulated depreciation	(65700)		(36700)
TOTAL ASSETS	509800		469370
Liabilities and Equity
Liabilities:
Accounts payable	48100		47300
Notes payable	160000		185000
Total Liabilities	208100		232300
Equity:
Common stock	130000		100000
Retained earnings	171700		137070
Total equity	301700		237070
TOTAL LIABILITIES AND EQUITY	509800		469370

The following additional information is provided:

1. Investments that originally cost OMR 30000 were sold for OMR 47500 cash.
2. Investments were purchased for OMR 50000 cash.
3. Plant assets were purchased for OMR 66000 cash.
4. Cash dividends were declared and paid to shareholders in the amount of OMR 8000.

From the above information prepare Statement of Cash Flows (Indirect Method) from the above information and based on the statement Answer the following 5 questions (Do not upload Statement of Cash Flows)

Proceeds from sale of investments will be:

a.

Added to cash flow from investing activities

b.

Added to cash flow from operating activities

c.

Deducted from cash flow from investing activities

d.

Deducted from cash flow from operating activities

Q2

Notes payable is increased in the year 2018, the impact will be:

a.

Cash inflow of OMR 25000 from financing activity

b.

Cash outflow of OMR 25000 from financing activity

c.

Cash outflow of OMR 25000 from investing activity

d.

Cash inflow of OMR 25000 from investing activity

Q3

Issuance of common stock to the stock holders will be:

a.

Added to cash flow from financing activity

b.

Deducted from cash flow from investing activity

c.

Deducted from cash flow from financing activity

d.

Added to cash flow from investing activity

Q4

The accounting treatment of prepaid insurance in the statement of cash flows will be:

a.

Increased value of OMR 1200 will be deducted from operating activities

b.

Decreased value of OMR 1200 will be added to operating activities

c.

Increased value of OMR 1200 will be deducted from financing activities

d.

Decreased value of OMR 1200 will be added to financing activitie

Q5

Net cash flow from investing activities as per the statement of cash flows will be:

a.

An outflow of OMR 68500

b.

An outflow of OMR 65800

c.

An inflow of OMR 86500

d.

An inflow of OMR 68500

Answer & Explanation Solved by verified expert

See Answer