FR – L2 – Q73 – Statement of Cash Flows

Prepare a cash flow statement for Fellon Plc for 20X4 using IAS 7, based on provided financial data and additional information.

Question

Fellon Plc has prepared the following rough draft accounts for the year ended 31 December 20X4.

Statement of profit or loss

	GH₵’000
Revenue	11,563
Cost of sales	(5,502)
Gross profit	6,061
Distribution costs	(402)
Administration expenses	(882)
Interest payable	(152)
Operating profit before tax	4,625
Taxation (35%) including deferred tax	(1,531)
Profit after tax	3,094
Dividends	(700)
Retained profit	2,394

Statements of financial position

	31 December 20X4 GH₵’000	31 December 20X3 GH₵’000
Non-current assets
Property, plant and equipment	10,380	9,108
Current assets
Inventories	2,208	1,314
Trade receivables	1,986	1,392
Investments	1,992	2,190
Cash at bank and in hand	–	576
	6,186	5,472
Total assets	16,566	14,580
Equity and liabilities
Equity
Share capital	4,392	3,600
Retained earnings	6,714	4,320
	11,106	7,920
Non-current liabilities
Long-term loans	1,240	1,800
Deferred repairs provision	702	516
	1,942	2,316
Current liabilities
Trade payables	2,038	1,714
Bank overdraft	222	–
Taxation	1,258	2,630
	3,518	4,344
Total equity and liabilities	16,566	14,580

The following data is relevant.
(1) The 10% long-term loan was redeemed at par.
(2) Plant and equipment with a written down value of GH₵276,000 was sold for GH₵168,000. New plant was purchased for GH₵2,500,000.
(3) Buildings costing GH₵1,300,000 were acquired during the year.
(4) The investments are highly liquid securities held for the short term.

Required
Prepare the cash flow statement and supporting notes in accordance with IAS 7 for Fellon Plc for 20X4.

Answer

Fellon Plc
Statement of cash flows for the year-ended 31 December 20X4

	GH₵’000
Cash flows from operating activities
Net profit before tax	4,625
Adjustments for:
Depreciation, (W1-3)	1,472
Interest payable	152
Operating profit	6,249
Increase in deferred repairs provision	186
Increase in inventories	(894)
Increase in receivables	(594)
Increase in payables	324
Cash generated from operations	5,271
Interest paid	(152)
Tax paid (W5)	(1,775)
Net cash from operating activities	3,344
Cash flows from investing activities
Acquisition of long-term investment	(198)
Purchase of property plant and equipment	(3,800)
Receipt from sale of long-term investment	168
Net cash used in investing activities	(3,830)
Cash flows from financing activities
Proceeds of share issue (W6)	792
Redemption of long term loan	(560)
Dividends paid	(544)
Net cash used in financing activities	(312)
Net increase in cash and cash equivalents	(798)

Workings

(1) Buildings (net)

	GH₵’000		GH₵’000
Brought forward	5,700	Depreciation (to balance)	400
Additions	1,300	Carried forward	6,600
	7,000		7,000

(2) Plant and equipment (net)

	GH₵’000		GH₵’000
Brought forward	3,408	Disposals	276
Additions	2,500	Depreciation (to balance)	1,072
		Carried forward	4,560
	5,908		5,908

(3) Disposals

	GH₵’000		GH₵’000
Cost (balancing figure)	1,380	Accumulated depreciation	1,104
		Cash proceeds	168
		Loss on sale (to I&E)	108
	1,380		1,380

(4) Share capital

	GH₵’000		GH₵’000
Carried forward	4,392	Brought forward	3,600
		Cash (to balance)	792
	4,392		4,392

(5) Taxation

	GH₵’000		GH₵’000
Cash paid (to balance)	1,775	Brought forward	2,630
Carried forward	2,386	I&E	1,531
	4,161		4,161

(6) Long term loan

	GH₵’000		GH₵’000
Cash (to balance)	560	Brought forward	1,800
Carried forward	1,240
	1,800		1,800

(7) Analysis of the balances of cash and cash equivalents as shown in the statement of financial position
Cash and cash equivalents consist of cash on hand and balances with banks.

	20X4 GH₵’000	20X3 GH₵’000	Change in year GH₵’000
Cash at bank and in hand	–	576	(576)
Bank overdrafts	(222)	–	(222)
	(222)	576	(798)

Tags: Cash Flow Statement, Depreciation, Dividends, Financial Position, Financing Activities, IAS 7, Investing Activities, Loan Redemption, Operating Activities
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)

Uploader: Samuel Duah