Explanation Cash Flow Statement: It is a financial statement which gives information about company’s cash inflows and outflows during an accounting year. It tells the cash position of the company and shows from where company generates its cash and how it is used in the business. Direct Method: It refers to preparation of cash flow statement by converting the accrual basis into cash basis by adjusting each line item as indirect method This method ignore the items like, depreciationand amortization as it includes only cash transaction. For example- cash received from debtors, interest paid in cash, payment of cash to supplier. Operating Activities: It is the first part of cash flow statement It focus on inflow and outflow of cash from enterprise main.business operation like purchasing and selling of goods and services. It excludes long-term capital or investment costs. Investing Activities: It is the second part of cash flow statement It focus on cash flow related to purchasing and selling of long term assets of the firm like plant, building, machinery. Financing Activities : It is the third part of cash flow statement It focus on cash flow related to change in size and composition of equity and debt capital of the company like issue of share and debenture, payment of dividend. Following is the cash flow statement using direct method: Cash flow statement of Super view Company For the year ended 31 December Cash flow from operating activities Amounts($) Cash collected from customer 1,798,750 Less: Cash paid for merchandise (1,078,250) Less: Cash paid to other suppliers (998,500) Less: Cash paid for interest (75,110) Add: Cash received for discontinued operation 20,500 Add: Cash received from franchise fees 8,950 Less: Cash paid for taxes (80,000) Net cash used in operating activities (403,660) Cash flow from investing activities Purchase equipment (885,000) Purchase franchise (66,250) Net cash used in investing activities (951,250) Cash flow from financing activities Issued long term debt 225,675 Purchase treasury stock (438,315) Issued common stock 1,230,000 Additional paid up capital 360,500 Net cash used in financing activities 1,377,860 Increase in cash for the year 22,950 Opening cash balance 75,890 Closing cash balance 98,840 Table (1) The above table shows the value from operation by cash inflows which are received from customer and deduct all expense and purchase made. Hence. Cash used in operating activities is $403,660. The cash flow from investing activities is ($951,250) and from financing activities is $1,377,860. The addition of all these three reflects net increase or decrease in cash. Therefore, net increase in cash is $22,950 which is to be added in opening balance of cash of $75,890. Thus, the net closing balance of cash is $98,840 as on 31 December which is given in the balance sheet. Working Note: Calculation of net purchase of plant during the period: Account: Tangible assets (PPE) Date Item Post ref. Debit ($) Credit ($) Balance ($) Opening balance 1,500,000 Depreciation 200,000 1,300,000 Purchase (885,000) 415,000 Closing balance 2,185,000 Table (2) The net purchase of plant during the period is ($885,000). Calculation of net purchase during the year: Account: Intangible assets (PPE) Date Item Post ref. Debit ($) Credit ($) Balance ($) Opening balance 168,750 Amortization 30,000 138,750 Purchase (66,250) 205,000 Closing balance 205,000 Table (3) The net purchase of intangible assets (franchise) during the period is ($66,250). Calculation of amount of tax expenses: Account: Tax expenses Date Item Post ref. Debit ($) Credit ($) Balance ($) Opening balance 0 Current provision 244,064 244,064 Increase in DTA 0 244,064 Increase in DTL 44,064 200,000 Closing balance 200,000 Table (4) The closing balance of tax expenses is $200,000. Calculation of amount of interest expenses: Account: Interest expenses Date Item Post ref...