Tutorial 7- Cash flow statement 2

Question 1
The statements of financial position of Radar plc at 30 September were as follows:

20X8 20X9
$'000 $'000 $'000 $'000
Non-current assets:
Property, plant and equipment, at cost 760 920
Less accumulated depreciation (288) (318)
472 602
Investments 186 214
Current assets:
Inventory 596 397
Trade receivables 332 392
Bank 5 933 0 789

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Total assets 1,591 1,605

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Capital and reserves:

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Ordinary shares 350 500
Share premium 75 125

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Retained earnings
rs e 137 562 294 919
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Non-current liabilities:
12% debentures 400 100
Current liabilities:
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Trade payables 478 396

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Accrued expenses 64 72
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Taxation 87 96
Overdraft 0 22
629 586
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Total equity and liabilities 1,591 1,605

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The following information is available:

(i) An impairment review of the investments disclosed that there had been an impairment of
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$20,000.
(ii) The depreciation charge made in the statement of comprehensive income was $64,000.
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(iii) Equipment costing $72,000 was sold for $54,000 which gave a profit of $16,000.
(iv) The debentures redeemed in the year were redeemed at a premium of 25%.
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(v) The premium paid on the debentures was written off to the share premium account.
(vi) The income tax expense was $92,000.
(vii) A dividend of $25,000 had been paid and dividends of $17,000 had been received.
Required:
Prepare a statement of cash flows for the year ended 30 September using the indirect method.

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 Question 2
Shown below are the summarised final accounts of Martel plc for the last two financial years:

Statements of financial position as at 31 December

20X1 20X0
£'000 £'000 £'000 £'000
Non-current assets
Tangible
Land and buildings 1,464 1,098
Plant and machinery 520 194
Motor vehicles 140 62
2,124 1,354
Current assets
Inventory 504 330
Trade receivables 264 132
Government securities 40 -

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Bank - 22

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808 484

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Current liabilities
Trade payables 266 220

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Taxation
rs e 120 50
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Proposed dividend 72 40
Bank overdraft 184 -
642 310
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Net current assets 166 174

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Total assets less current liabilities 2,290 1,528

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Non-current liabilities:
9% debentures (432) (350)
1,858 1,178
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Capital and reserves

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Ordinary shares of 50p each fully paid 900 800

Share premium account 120 70
Revaluation reserve 360 -
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General reserve 100 50

Retained earnings 378 258
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958 378
1,858 1,178
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 Summarised statement of comprehensive income for the year ending 31 December
20X1 20X0
£'000 £'000
Operating profit 479 215
Interest paid 52 30
Profit before taxation 427 185
Tax 149 65
Profit after taxation 278 120

Additional information:
1. The movement in non-current assets during the year ended 31 December 20X1 was as follows:
Land and buildings Plant, etc. Motor vehicles
£'000 £'000 £'000
Cost at 1 January 20X1 3,309 470 231
Revaluation 360 - -

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Additions 81 470 163

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Disposals - (60) -

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Cost at 31 December 20X1 3,750 880 394
Depreciation at 1 January 20X1 2,211 276 169

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Disposals - (48) -
Added for the year
rs e 75 132 85
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Depreciation at 31 December 20X1 2,286 360 254

The plant and machinery disposed of during the year was sold for £20,000.
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2. During 20X1, a rights issue was made of one new ordinary share for every eight held at a price
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of £1.50.
3. A dividend of £36,000 (20X0 £30,000) was paid in 20X1. A dividend of £72,000 (20X0 £40,000)
was proposed for 20X1. A transfer of £50,000 was made to the general reserve.
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Required:
(a) Prepare a statement of cash flows for the year ended 31 December 20X1, in accordance with
IAS 7.
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(b) Prepare a report on the liquidity position of Martel plc for a shareholder who is concerned
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about the lack of liquid resources in the company.

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 Question 3
The financial statements of Saturn plc have been prepared as follows:

Statements of financial position as at 30 June 20X2 20X1

€'000 €'000 €'000 €'000
Non-current assets:
Property, plant and equipment at cost 6,600 5,880
Accumulated depreciation (1,680) 4,920 (1,380) 4,500
Development costs 540 480
Investments 420 300
Current assets:
Inventory 1,665 1,872
Trade receivables 1,446 1,188
Cash 9 3,120 42 3,102
9,000 8,382
Equity and reserves:

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Ordinary share of €1 each 3,000 2,700

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Share premium account 600 270

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Retained earnings 3,084 6,684 2,622 5,592

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Non-current liability: rs e
7% debentures - 1,200
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Current liabilities:
Trade payables 1,632 1,104
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Taxation 507 396

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Dividend declared 60 90
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Bank overdraft 117 2,316 - 1,590

Total equity and liabilities 9,000 8,382
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Further information:
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(a) Extract from statement of income

€’000
Operating profit 1,008
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Dividend received 36
Premium on debentures (120)
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Interest paid (144)

Profit before taxation 780
Income tax (258)
Profit after tax 522
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(b) Operating expense written off in the year include the following:
€’000
Amortisation of development costs 102
Depreciation of property, plant and equipment 318
(c) Equipment which had cost €240,000 was sold in the year, incurring a loss of €156,000.
(d) The debentures were redeemed at a premium of 10%.

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 Required:
(a) Prepare a statement of cash flows for the year ended 30 June 20X2.
(b) Briefly explain ways in which statements of cash flows may be more useful than statements
of income.

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rs e
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aC s
vi y re
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