NFORMATION
NUWARE LIMITED
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 R
Cash flows from operating activities
2 540 000
Profit before interest and tax
7 700 000
Non-cash flow adjustments
700 000
Add: Depreciation
700 000
Profit before working capital changes
Working capital changes
8 400 000
690 000
Decrease in inventory
Decrease in receivables
Increase in payables
180 000
310 000
200 000
Cash generated from operations
9 090 000
Interest paid
(150 000)
Dividends paid
(4 900 000)
Company tax paid
(1 500 000)
Cash flow from investing activities
(4 200 000)
Land, buildings and equipment purchased
(4 200 000)
Cash flow from financing activities
1 100 000
Increase in long-term borrowings
1 100 000
Net decrease in cash and cash equivalents
?
Cash and cash equivalents at beginning of year
?
Cash and cash equivalents at end of year
?
- Why was depreciation included in computing the cash flow from operating activities? (2 marks)
- Calculate the cash balance on 31 December 2019 if there was a bank overdraft of R460 000 on 31 December 2020. (2 marks)
- Based on the cash flow information above, how does the company appear to be performing? Explain by referring to at least five items in the cash flow statement. (10 marks)
- Long term loans were increased during 2020. Was this the most appropriate way of financing the purchase of assets? (3 marks)
1.5 What cash receipts increase cash but not profits? (3 marks)
NFORMATION
NUWARE LIMITED
|
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 R |
|
|
Cash flows from operating activities |
2 540 000 |
|
Profit before interest and tax |
7 700 000 |
|
Non-cash flow adjustments |
700 000 |
|
Add: Depreciation |
700 000 |
|
Profit before working capital changes Working capital changes |
8 400 000 690 000 |
|
Decrease in inventory Decrease in receivables Increase in payables |
180 000 310 000 200 000 |
|
Cash generated from operations |
9 090 000 |
|
Interest paid |
(150 000) |
|
Dividends paid |
(4 900 000) |
|
Company tax paid |
(1 500 000) |
|
Cash flow from investing activities |
(4 200 000) |
|
Land, buildings and equipment purchased |
(4 200 000) |
|
Cash flow from financing activities |
1 100 000 |
|
Increase in long-term borrowings |
1 100 000 |
|
Net decrease in cash and cash equivalents |
? |
|
Cash and cash equivalents at beginning of year |
? |
|
Cash and cash equivalents at end of year |
? |
- Why was depreciation included in computing the cash flow from operating activities? (2 marks)
- Calculate the cash balance on 31 December 2019 if there was a bank overdraft of R460 000 on 31 December 2020. (2 marks)
- Based on the cash flow information above, how does the company appear to be performing? Explain by referring to at least five items in the cash flow statement. (10 marks)
- Long term loans were increased during 2020. Was this the most appropriate way of financing the purchase of assets? (3 marks)
1.5 What cash receipts increase cash but not profits? (3 marks)
Related questions
Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by issuing 350 000 $5.00 shares, payable in full on application on a first-come, first-served basis. By 31 July 2016 the shares were fully subscribed and duly allotted. There were share issue costs of $10 000. No additional shares were issued during the year ending 30 June 2017.
For the year ending 30 June 2018, the company recorded the following aggregate transactions:
| $ | |
| Sales | 5 120 000 |
| Interest income | 34 000 |
| Sundry income | 25 000 |
| Cost of Sales | 2 465 000 |
| Employee benefit expenses | 856 000 |
| Depreciation expense | 244 000 |
| Amortisation - franchise | 25 000 |
| Rental expense | 120 000 |
| Advertising expense | 147 000 |
| Insurance expense | 48 000 |
| Freight out expense | 110 000 |
| Doubtful debts expense | 16 000 |
| Interest expense | 36 000 |
| Borrowing Costs | 9 000 |
| Other expenses | 8 000 |
| Income tax expense | 320 000 |
The following additional information was noted during the preparation of financial statements for the year ended 30 June 2018:
75 000 fully paid ordinary shares have been issued on 1 October 2017 at the price of $4.00.
$135 000 dividends (31.76 cents per share) were declared and paid during the 2018 financial year. A final dividend for 2018 of $51 850 was proposed but not recognised in the financial statements.
There was a gain of $20 000 from the cash flow hedge arrangement during the 2018 financial year. Any gain or loss associated with the cash flow hedge is directly recognised in equity. There was no previously recognised cash flow hedge reserve before the 2018 financial year.
$25 000 of bank loans is repayable within 1 year.
$90 000 of other loans is repayable within 1 year.
The employee benefits of $32 000 are expected to be settled wholly within 12 months.
Emerald Ltd measures inventory at the lower of cost and net realizable value and property, plant and equipment using a cost model.
The summarised balances are provided below:
| Year-end balances, 30 June 2018 | $ |
| Cash on hand | 960 000 |
| Cash on deposit, at call | 82 000 |
| Accounts Receivables | 665 000 |
| Allowance for doubtful debts/ Impairments | 24 000 |
| Other debtors | 27 000 |
| Finished goods inventories, 30 June 2018 | 600 000 |
| Work in Progress inventories 30 June 2018 | 105 000 |
| Land | 94 000 |
| Buildings | 230 000 |
| Accumulated depreciation â buildings | 60 000 |
| Plant and equipment | 1 385 000 |
| Accumulated depreciation â plant and equipment | 330 000 |
| Franchises | 140 000 |
| Accumulated amortisation of franchise | 50 000 |
| Goodwill | 620 000 |
| Bank loans | 92 000 |
| Other loans | 440 000 |
| Accounts payable | 696 000 |
| Provision for employee benefits | 116 000 |
| Income tax payable | 35 000 |
| Deferred tax liability | 140 000 |
| Retained earnings, 30 June 2017 | 225 000 |
| Dividends paid | 135 000 |
| Cash flow hedge reserve (equity) | 20 000 |
Required:
For the year ending 30 June, 2018,
a) Using the pro forma table supplied in appendix B, prepare a preliminary trial balance for Emerald Ltd; (5 Marks)
b) Prepare a statement of profit or loss and comprehensive income for Emerald Ltd in accordance with the requirements of AASB 101. Emerald Ltd uses the single statement format for the statement of comprehensive income and classifies expenses by function within the statement; (18 marks)
c) Prepare a statement of changes in equity for Emerald Ltd in accordance with the requirements of AASB 101; (15 marks)
d) Prepare a statement of financial position for Emerald Ltd in accordance with AASB 101. Use the current/non-current presentation format; (17 marks)
e) Prepare appropriate notes to the accounts. (You do not need to prepare notes related to income taxes. Include the following note as note 1. You may optionally add accounting policies to this note): (25 marks).
â1. Summary of significant accounting policies
Basis of accounting
The financial report is a general purpose financial report which has been prepared on the historical cost basis, except where stated otherwise.
Statement of Compliance
The financial statements have been prepared in accordance with the requirements of the Corporations Act, Australian Accounting Standards which include Australian equivalents to International Financial Reporting Standards (AIFRSs) and AASB Interpretations. Compliance with AIFRSs ensures the financial statements and notes comply with International Financial Reporting Standardsâ
APPENDIX A: PRESENTATION REQUIREMENTS (Departures attract a penalty)
The hard copy of the assignment must be handed in to the lecturer in class. It is also required to be submitted through Turnitin by the due date;
It is worth 20% of the final grade but will be marked out of 100;
The assignment will be marked on the basis of a requirement of "suitable for publication", that is, the relevant statements/notes comprise an external report and each statement is to be presented on one page;
The assignment must be performed individually.
You are to employ an aggregated format whenever appropriate and consistent with provision of minimum line items prescribed in AASB101;
The financial statements and the notes are to be typed in 12 point font;
You are not to use specialized accounting software packages, such as are employed by professional accounting firms, to produce your financial reports;
You are to apply the âcost of salesâ method to the classification of expenses in the income statement (see AASB101 paras 97-105);
You are directed to use the current/non-current format for the statement of financial position (balance sheet) and supply a ânet assetsâ line item;
The notes are to be simplified equivalences to published reports; that means a list of constituent components of a given line item with their respective dollar amounts, not footnotes
Your hard copy assignment is to be collated in the following order:
Coversheet (optional for electronic version but mandatory, signed with ticked module and Turnitin ID, for hard copy), Part A followed by Part B (trial balance, statement of profit or loss comprehensive income, statement of changes in equity, statement of financial position, and notes to the accounts.
APPENDIX B
| Emerald Ltd - Trial Balance as at 30 June 2018 | DR | CR |
| Sales | $â000 | $â000 |
| Interest income | ||
| Sundry income | ||
| Cost of sales | ||
| Employee benefit expenses | ||
| Depreciation expense | ||
| Amortisation - franchise | ||
| Rental expense | ||
| Advertising expense (selling) | ||
| Insurance expense | ||
| Freight out expense | ||
| Doubtful debts expense | ||
| Interest expense | ||
| Borrowing costs | ||
| Other expenses | ||
| Income tax expense | ||
| Cash on hand | ||
| Cash on deposit, at call | ||
| Accounts Receivables | ||
| Allowance for doubtful debts/ Impairments | ||
| Other debtors | ||
| Finished goods inventories, 30 June 2018 | ||
| Work in Progress inventories 30 June 2018 | ||
| Land | ||
| Buildings | ||
| Accumulated depreciation â buildings | ||
| Plant and equipment | ||
| Accumulated depreciation â plant and equipment | ||
| Franchise | ||
| Accumulated amortisation of franchise | ||
| Goodwill | ||
| Bank loans | ||
| Other loans | ||
| Accounts payable | ||
| Provision for employee benefits | ||
| Income tax payable | ||
| Deferred tax liability | ||
| Retained earnings, 30 June 2017 | ||
| Dividends paid | ||
| Cash flow hedge reserve | ||
| Share capital | ||
| Totals |
