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Business · Accounting
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Use the following data to answer questions in this part:

Balance sheet data

Assets

20X7

20X6

Cash

$2,900

$1,000

Accounts receivable

2,500

2,000

Inventory

7,400

8,000

Property, plant, equipment

9,200

9,000

Accumulated depreciation

(2,900)

(2,500)

Total assets

$19,100

$17,500

Liabilities and Equity

Accounts payable

$4,700

$4,500

Interest payable

1,500

1,000

Dividends payable

1,000

2,500

Long-term debt

4,350

3,700

Bank note

1,000

800

Common stock

3,300

3,000

Retained earnings

3,250

2,000

Total liabilities and equity

$19,100

$17,500

Income statement for the year 20X7

Sales

$28,500

COGS

19,900

Depreciation

3,700

Interest expense

1,244

Gain on sale of old machine

1,150

Taxes

1,142

Net income

$3,664

Notes:

  • Dividends declared to shareholders were $850.
  • New common shares were sold at par for $1020.
  • Fixed assets were sold for $3500. Original cost of these assets was $2000, and $350 of accumulated depreciation has been charged to their original cost.
  • The firm borrowed $200 in a 10-year bank note – the proceeds of the loan were used to pay for new fixed assets.
  • Depreciation for the year was $3700 (accumulated depreciation up $2900 and depreciation on sold assets $800).
  • The company uses the LIFO inventory cost flow method. Had FIFO been used, inventories would have been $1,000 higher in 20X6 and $900 higher in 20X5.
  • The effective tax rate for 20X6 was 30%. For all other years, the effective tax rate was 20%.
  • At the beginning of 20X8, A firm issues a $10,000 bond with a 6% coupon rate, 4-year maturity, and annual interest payments when market interest rates are 7%.
  1. Assuming IFRS, calculate cash flow from operations with the direct method. Please explain your answer by showing each step of calculation.
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