- 21 Marks
Question
The financial statements of Blamo PLC, a retailer of electronic products, are given below:
Statement of Financial Position as at 31 October
| 2024 GH¢’000 | 2023 GH¢’000 | |
|---|---|---|
| Non-current assets | ||
| Property, Plant & Equipment | 96,624 | 83,508 |
| Intangible assets | 8,634 | 10,590 |
| Total Non-current assets | 105,258 | 94,098 |
| Current assets | ||
| Inventories | 65,586 | 56,880 |
| Receivables | 26,574 | 23,352 |
| Cash at bank and in hand | 21,948 | 45,108 |
| Total Current assets | 114,108 | 125,340 |
| Total Assets | 219,366 | 219,438 |
| 2024 GH¢’000 | 2023 GH¢’000 | |
|---|---|---|
| Equity | ||
| Equity shares of GH¢1 each | 2,700 | 2,400 |
| Share deals account | 9,600 | 9,000 |
| Retained earnings | 53,706 | 52,944 |
| Total Equity | 66,006 | 64,344 |
| Non-current liabilities | ||
| 7% Loan notes | 41,700 | 9,000 |
| Obligations under finance leases | 5,958 | 2,136 |
| Deferred taxation | 1,404 | 648 |
| Total Non-current liabilities | 49,062 | 11,784 |
| Current liabilities | ||
| Trade payables | 85,794 | 138,972 |
| Overdraft | 12,738 | – |
| Taxation | 1,800 | 1,500 |
| Warranty provision | 3,066 | 2,568 |
| Obligations under finance leases | 900 | 270 |
| Total Current liabilities | 104,298 | 143,310 |
| Total Equity & Liabilities | 219,366 | 219,438 |
Statement of Profit or Loss for the Year Ended 31 October 2024
| GH¢’000 | |
|---|---|
| Revenue | 500,580 |
| Cost of sales | (425,256) |
| Gross profit | 75,324 |
| Operating expenses | (62,676) |
| Profit from operations | 12,648 |
| Finance costs | (4,854) |
| Profit before tax | 7,794 |
| Taxation | (4,032) |
| Profit for the year | 3,762 |
Statement of Changes in Equity for the Year Ended 31 October 2024
| Share Capital | Share Deals A/c | Retained Earnings | Total | |
|---|---|---|---|---|
| Opening balance | 2,400 | 9,000 | 52,944 | 64,344 |
| Profit for the year | – | – | 3,762 | 3,762 |
| Dividends paid | – | – | (3,000) | (3,000) |
| Issue of shares | 300 | 600 | – | 900 |
| Closing balance | 2,700 | 9,600 | 53,706 | 66,006 |
Additional Information:
i) An item of plant with a carrying amount of GH¢5,790,000 was sold at a loss of GH¢300,000 during the year. Depreciation of GH¢14,370,000 was charged.
ii) New assets were acquired under finance leases with fair value GH¢5,760,000.
iii) No acquisitions or disposals of intangible assets.
iv) Shares were issued at full market value.
v) Warranty costs are included in cost of sales.
Required:
a) Prepare a Statement of Cash Flows for Blamo PLC for the year ended 31 October 2024 in accordance with IAS 7.
b) Explain THREE benefits of cash flow statements to Blamo PLC.
Answer
BLAMO PLC
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER 2024
| GH¢’000 | |
|---|---|
| Cash flows from operating activities: | |
| Profit before tax | 7,794 |
| Adjustments for: | |
| Finance costs | 4,854 |
| Depreciation | 14,370 |
| Amortisation of intangible assets | 1,956 |
| Increase in warranty provision | 498 |
| Loss on sale of assets | 300 |
| Operating cash flows before working capital changes | 29,772 |
| Increase in inventories | (8,706) |
| Increase in receivables | (3,222) |
| Decrease in payables | (53,178) |
| Cash generated from operations | (35,334) |
| Interest paid | (4,854) |
| Tax paid | (2,976) |
| Net cash outflow from operating activities | (43,164) |
| GH¢’000 | |
|---|---|
| Cash flows from investing activities: | |
| Proceeds from sale of property | 5,490 |
| Purchase of property, plant and equipment | (27,516) |
| Net cash outflow from investing activities | (22,026) |
| GH¢’000 | |
|---|---|
| Cash flows from financing activities: | |
| Issue of share capital | 900 |
| Issue of borrowings | 32,700 |
| Repayment of finance leases | (1,308) |
| Dividends paid | (3,000) |
| Net cash inflow from financing activities | 29,292 |
| GH¢’000 | |
|---|---|
| Net decrease in cash and cash equivalents | (35,898) |
| Cash and cash equivalents at beginning of year | 45,108 |
| Cash and cash equivalents at end of year | 9,210 |
Benefits of Cash Flow Statements (Any THREE):
• Assesses liquidity and solvency
• Evaluates ability to generate cash
• Facilitates comparison between entities
• Aids forecasting of future cash flows
• Shows changes in financial structure
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