Maria acquired Central Delivery Services in 2018 providing

Introduction

Answer – 1(a)

The financial statements mentioned above are income statement, statement of financial position, and statement of changes in equity. Income statement shows the operations of the company along with non-operating incomes and expenses. The financial analysts use this statement for the assessment of financial performance of a company. Statement of financial position shows the assets owned and liabilities owed by the company to the outsiders; as the name suggests, this statement shows the financial position of the company. Statement of changes in equity shows the changes that take place in the composition of owner’s equity which include retained earnings, dividends paid, income earned during the year, among others.

Answer – 1(b)

The errors which have been made by Maria are listed below:

• Revenue received in advance, cash, and accounts receivable have been shown as part of revenues in the income statement;
• Accumulated depreciation-motor vehicle, and accounts payable have been shown under expenses in the income statement;
• Delivery vehicles have been shown under current assets and supplies have been shown under non-current assets;
• Long-term bank loan has been shown as part of current liabilities;
• Net assets have been shown separately;
• Profit earned during the year has not been shown in the statement of owner’s equity;
• Only the amount of capital has been shown under equity section of the balance sheet; and
• The balance of total assets and liabilities do not match.

The correct treatment of abovementioned errors is provided below:

• Revenue received in advance, cash, and accounts receivable should be should be shown under current assets in the statement of financial position;
• Accumulated depreciation-motor vehicle, and accounts payable should be shown under current liabilities in the statement of financial position;
• Delivery vehicles should be shown under non-current assets and supplies should be shown under current assets in the statement of financial position;
• Long -term bank loan should be shown as part of non-current liabilities in the statement of financial position;
• There is no need of showing net assets separately;
• The profits earned during the year should be shown as an addition to the beginning balance of retained earnings in the statement of owner’s equity;
• The ending balance of retained earnings should be shown under equity section of balance sheet;
• The balance of total assets should match with the combined balance of total liabilities and owner’s equity.

Answer – 2

After reviewing each section of the given Statement of Cash Flows of Harvey Norman prepared for the year ending June 30, 2019, it can be inferred that the company:

• Receipts from franchises have been reduced in June 2019 as compared to June 2018; receipts from customers and payment to suppliers, both have been increased; payment of GST and income taxes has also been reduced in June 2019; and hence the overall cash generated from operating activities has been reduced by $81,325 in June 2019 as compared to June 2018.
• On the observation of the cash flow from investing activities, it is found that the company has purchased less investment properties in June 2019; proceeds from insurance claims and payments made for purchasing equity accounted investments have also been reduced in June 2019; however, the cash received by the company in exchange of sale of equity investments and sale of Coomboona JV assets has been increased in June 2019; and hence the overall cash used in investing activities has been reduced by $237,282 in June 2019 as compared to June 2018.
• On the observation of the cash flow from financing activities, it is found that the company has received cash for shares issued against renounceable pro-rata entitlement offer in June 2019; the payment of dividend and repayment of loan has been increased in June 2019; and hence the overall cash used in financing activities has been increased by $60,353.

On the basis of above analysis, it is concluded that one should invest in this company as the overall cash position of the company has been improved in the year 2019.