FR – Nov 2018 – L2 – SA – Q1a – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows for Oshodi Nigeria Ltd using the indirect method and IAS 7.

Question

The financial statements of OSHODI Nigeria Limited for the year ended May 13, 2017, are as follows:

Statement of Profit or Loss for the year ended May 31, 2017:

Item	N’m
Revenue	3,820
Cost of sales	(2,620)
Gross profit	1,200
Operating expenses	(300)
Profit before interest and tax	900
Interest	(30)
Profit before tax	870
Taxation	(270)
Net profit	600

Statement of Financial Position as at May 31, 2017 (with comparative figures for 2016):

Assets	2017 N’m	2016 N’m
Non-Current Assets
Property, plant, and equipment	1,890	1,830
Intangible assets	650	300
Total non-current assets	2,540	2,130
Current Assets
Inventory	1,420	940
Accounts receivable	990	680
Cash	70	Nil
Total current assets	2,480	1,620
Total Assets	5,020	3,750

Equity and Liabilities:

Equity	2017 N’m	2016 N’m
Ordinary shares of N1 each	750	500
Share premium	300	100
Revaluation reserve	190	Nil
Retained earnings	1,610	1,400
Total equity	2,850	2,000

OSHODI NIGERIA LIMITED
Statement of Changes in Equity for the year ended May 31 2017

Notes to the financial statements:
(1) Cost of sales includes depreciation of property, plant and equipment of N320 million and a
loss on the sale of plant of N50 million. It also includes a credit for the amortisation of
government grants. Operating expenses include a charge of N20 million for the amortisation
of goodwill

(2)

(3)

(4)

The following additional information is relevant:
(i) Intangible assets:
The company successfully completed the development of a new product during the current
year, capitalising a further N500 million before amortisation charges for the period.

(ii) Property, plant and equipment/revaluation reserve:
The company revalued its buildings by N200 million on June 1 2016. The surplus was
credited to revaluation reserve.

New plant was acquired during the year at a cost of N250 million and a government grant
of N50 million was received for the plant.
On June 1, 2016, a bonus issue of 1 new share for every 10 held was made from the share
premium.
N10 million has been transferred from the revaluation reserve to realized profits as a year-end adjustment in respect of the additional depreciation created by the revaluation.
The remaining movement on property, plant and equipment was due to the disposal of
obsolete plant.

(iii) Share issue:
In addition to the bonus issue referred to above, Oshodi Nigeria Limited made a further issue
of ordinary shares for cash.

Required:
Prepare the statement of cash flows for Oshodi Nigeria Limited for the year ended May 31, 2017, using the indirect method according to IAS 7.

Answer

OSHODI NIGERIA LIMITED
STATEMENT OF CASH FLOW FOR THE YEAR ENDED MAY 31, 2017