Question

QUESTION 4 (20 Marks) Your friend has his own business, but was in a serious motor accident prior to finalising the financial statements for the year ended 28 February 2019. His wife asked you to please assist in preparing the cash flow statement for 2019. The following extracts from the annual reports for 2019 were provided: Income statement Revenue (sales) Cost of sales Gross profit Depreciation Loss on sale of non-current asset Interest paid Other operating expenses Profit before taxation Taxation Profit for the year 2019 5000 -2350 2650 -500 -200 -70 -1119 461 -129 332 2018 5200 -2400 2800 -400 -100 -80 -1500 720 -202 518 2019 2018 1913 26331 720 1125 1688 563 400 320 70 300 520 100 2703 2045 Balance sheet Assets Non-current assets: book value Cost Accumulated depreciation Current assets: Inventories Receivables Cash Total assets Equity and liabilities Share capital Retained income Shareholders' equity Deferred taxation Long-term loans Current liabilities: Payables Interest payable Taxation Total equity and liabilities 250 250 852 1102 870 887 565 600 500 45 2248 2773 Statement of changes in equity (2019) 2019 2019 Share capital Retained earnings Opening balance 250 620 Profit for the year 332 Dividends paid 0 -100 Closing balance 250 852 REQUIRED: Calculate the following components pertaining to the cash flow statement for the year ended 28 February 2019: - Cash flows from operating activities - Cash flows from investing activities - Cash flows from financing activities - Change in cash flows You can assume that the extracts provided (above) are all correct. Show all relevant calculations.

Answer 1

Cash Flow Statement for year ended 2019
Particulars	Amount
CASH FLOW FROM OPERATING ACTIVITIES
Net profit after taxes	332
(+) Taxation	129
(+) Depreciation	500
(+) loss on sale of non current asset	200
(+) interest paid	70
Operating profit before working capital changes	1,231
(-) Increase in inventories	(100)
(+) Decrease in receivables	200
(+) Increase in payables	100
Operating profit before tax	1431
(-) Taxes paid	(140)
Cash Flow from Operating Activities (A)	1,291
CASH FLOW FROM INVESTING ACTIVITIES
Non current asset purchases (Net of sales)	(1,488)
Cash Flow from Investing Activities (B)	(1,488)
CASH FLOW FROM FINANCING ACTIVITIES
Interest paid	(55)
Dividend paid	(100)
Proceed form Long term loan	322
Cash Flow From Financing Activities (C)	167
Net cash flow from Operations (A+B+C)	(30)
Opening balance of Cash	100
Closing Cash Balance	70

Income tax payable account
To, cash a/c (balancing figure)	140	By, balance b/d	45
		By, Profit & Loss a/c	110
To, Balance c/f	15

Note:- Income tax expenses is 110, as 19 is deferred tax expense.

Accumulated Depreciation account
To, asset a/c (balancing figure)	343	By, balance b/d	563
		By, Profit & Loss a/c	500
To, Balance c/f	720
Non current asset account
To, balance b/d	1,688	By, Accumulated Depreciation a/c	343
		By, loss on sale of asset a/c	200
To, cash a/c (net of sale)	1,488
		By, balance c/f	2633

Interest payable account
To, cash a/c (balancing figure)	55	By, balance b/d	15
		By, Profit & Loss a/c	70
To, Balance c/f	30