Question 5 Three sisters formed a partnership, SkinDeep, to sell skin care produ

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Question 5 Three sisters formed a partnership, SkinDeep, to sell skin care products made from organic ingredients. They have been operating for one year. The bank balance at the end of the year is $69 000. A summary of business transactions is as follows: Sales to customers Receipts from customers Payments for inventory Payments for electricity, telephone, rent and insurance Purchase of a motor vehicle Drawings Payment of interest Loan proceeds Interest received Equity injection $256000 217000 98000 5000 26 000 50000 8000 21000 1000 21 000 Required: Prepare a statement of cash flows from operating activities only. Show all n Question 6 The directors of Wuhan Ltd are considering an investment in a new computer system. The ecessary workings. details of the proposal ae as follows .Cost (investment) $420,000 Useful life 4 years Scrap value Nil Savings (cash flows) generated per year $130,000 for four years Required rate of return 10 per cent Present value factors for discount rate of 10% for n periods: Present value factor (10%) 0.909 0.826 0.751 0.683 Alternatively, present Value of Ordinary Annuity factor for discount rate of 10% for 4 years is 3.170 Required: (a) Calculate the net present value for the project and specify whether the proposed investment is acceptable. Taxation may be ignored. b) Explain two limitations of the 'payback method of evaluating capital investment decisions

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5.

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Skindeep Statement of Cash Flows Cash Flows from Operating Activities Cash receipts from customers 217000 Cash payments for inventory -98000 Cash payments for electricity, telephone, rent and insurance -5000 Cash payment of interest -8000 Cash receipts for interest 1000 Net cash provided by operating activities 107000

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