Problem 18.

5 Statement of cash flows, direct and indirect methods

The simplified financial statements of Titanium Ltd appear below:

TITANIUM LTD
Statement of Financial Position
as at 30 June
2017 2018
ASSETS
Cash $  37 200 $  15 600
Accounts receivable 33 600 16 800
Inventory 30 000 42 000
Plant and equipment 72 000 93 600
Accumulated depreciation – plant and equipment (26  400)   (28  800)
$146  400 $139  200
LIABILITIES AND EQUITY
Accounts payable $  32 400 $  27 600
Current tax liability 6 000 9 600
Loan payable 32 400 37 200
Share capital 41 600 41 600
Retained earnings     34  000     23  200
$146  400 $139  200

TITANIUM LTD
Income Statement
as at 30 June
Sales $264 000
Cost of sales 216  000
GROSS PROFIT 48 000
Selling expenses $16 800
Administrative expenses 9 600
Interest expense       1  200       27  600
Profit before tax 20 400
Income tax expense         4  800
PROFIT $    15  600

Additional information:

1. Dividends declared and paid were $26 400.

2. During the year equipment was sold for $10 200 cash. The equipment cost $21 600 and had a
carrying amount of $10 200 at the time of sale.
3. Depreciation expense is included as a selling expense in the income statement.
4. All sales and purchases are on credit.

Required:

A. Prepare a statement of cash flows using the indirect method.

B. Prepare a statement of cash flows using the direct method.