The following information is produced on an accrual basis and relates to Emily's Superior Photo Framers.
Statement of comprehensive mcome for the
year ended 31 December 2018

\begin{array}{lll}\text { Income}&\$80,880\\\text { Less Photo framing supplies used}&14,500\\&66,380\end{array}

Less Other Expenses

\begin{array}{ll}\text { Advertising } & \$ 250 \\\text { Salaries } & 18250 \\\text { Vehicle expenses } & 5300 \\\text { Office expenses } & 3500 \\\text { Rent of premises } & 20000 \\\text { Interest expenses } & 2000 \\\text { Depreciation of equipment } & 3600&52,900\\\text { Profit }&&\$13,480\end{array}

Statement of financial position as at 31 December 2018

\begin{array}{lll}&2017&&2018\\\text { Cunrent Assets } & \$ && \$ \\\text { Cash at bank } & 20500 && 4030 \\\text { Accounts receivable } & 1500 && 1650 \\\text { Stock of photo framing supplies } & 5500 && 3500\\&27,500&&9,180\\\text { Fixed Assets } & \\\text { Photo Framing Equipment } & 55700 &&65,000\\\text { Less Accumulated Depreciation } & 11200&44,500&14,800&50,200\\&&\$72,000&&\$59,380\end{array}

Current Liabilities

\begin{array} { l l } \text { Creditor owed for vehicle expenses } & - &1900\\\text { Long Term Liabilities } & \\\text { Loan Finance Co, repayable by 2020 } &18,000&15,000\\&18,000&16,900\end{array}

Equity

\begin{array}{lll}\text { Capital - Emily } & 34,000 & 34,000 \\\text { Current account Emily } & \underline{20,000} & \underline{8,480} \\& 54,000 & 42,480\\&\$72,000&\$59,380\end{array}

Additional Information:
• Emily withdrew $25 000 through the year for her own use.
• No photo framing equipment was sold during the year.
REQUIRED:
a)Prepare a classified statement of cash flows for the year ended 31 December 2018 from the above information. Show all workings.
b)Prepare a statement reconciling profit with cash flow from operating activities.
c)Comment on what the statement of cash flows reveals about the cash situation of Emily's Superior Photo Framers.
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What Is the Rule for Converting Credit Sales to Cash

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