Practice Exercise - Ship Shape Retail Strictly Confidential

Table of Contents

Ship Shape Cash Flow Statement

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Construct Direct and Indirect Cash Flow Statements for Ship Shape Retail Inc. - Year 1

You have…
1 Cash purchases 250
2 Cash sales 370
3 Cash expenses 40
4 Depreciation 55
There was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 370 Cash from sales 370 Net income 25

Purchases (250) Cash on purchases (250)
Expenses (40) Cash expenses (40)
Depreciation (55) Depreciation 55
Net income 25 Change in cash 80 Change in cash 80

Year 2

You have…
1 Cash purchases 280
2 Cash sales 300
3 Sales on credit 170
4 Cash expenses 50
5 Receipts from receivables 140
6 Depreciation 55
Again, there was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 470 Cash from sales 440 Net income 85

Purchases (280) Cash on purchases (280) Increase in A/R (30)
Expenses (50) Cash expenses (50)
Depreciation (55) Depreciation 55
Net income 85 Change in cash 110 Change in cash 110

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Year 3

You have…
1 Cash purchases 150
2 Cash sales 320
3 Sales on credit 310
4 Purchases on credit 180
5 Receipts from receivables 260
6 Payments to payables 140
7 Cash expenses 70
8 Depreciation 55
Again, there was no inventory at the year end.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 630 Cash from sales 580 Net income 175

Purchases (330) Cash on purchases (290) Increase in A/R (50)
Expenses (70) Cash expenses (70) Increase in A/P 40
Depreciation (55) Depreciation 55
Net income 175 Change in cash 220 Change in cash 220

Year 4

You have…
1 Cash purchases 200
2 Cash sales 400
3 Sales on credit 410
4 Purchases on credit 380
5 Receipts from receivables 390
6 Payments to payables 360
7 Cash expenses 100
8 Depreciation 55
There was closing inventory of 35.

Income Statement Cash Flow Direct Cash Flow Indirect

Revenue 810 Cash from sales 790 Net income 110

Opening inventory – Cash on purchases (560) Increase in A/R (20)
Purchases (580) Cash expenses (100) Increase in A/P 20
Closing Inventory 35 Increase in inventory (35)
Cost of sales (545)
Expenses (100)
Depreciation (55) Depreciation 55
Net income 110 Change in cash 130 Change in cash 130

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