- 20 Marks
FA – L1 – Q100 – Statement of cash flows
Question
SpicyFlare Limited
SpicyFlare Limited summarised final accounts are as follows:
Statements of financial position
| 31 December 20X8 | 31 December 20X8 | ||
|---|---|---|---|
| GH¢000 | GH¢000 | GH¢000 | |
| Non-current assets: | |||
| Plant and machinery at cost | 2,700 | ||
| Accumulated depreciation | (748) | ||
| Carrying amount | 1,952 | ||
| Current assets: | |||
| Inventory | 203 | ||
| Receivables | 147 | ||
| Bank | 51 | ||
| 401 | |||
| Total assets | 2,353 | ||
| Ordinary share capital (GH¢1 shares) | 740 | ||
| Share premium account | |||
| Retained earnings | 671 | ||
| 1,411 | |||
| Non-current liabilities: | |||
| Loans | |||
| Current liabilities: | |||
| Bank overdraft | |||
| Trade payables and accruals | 152 | ||
| Current taxation | 470 | ||
| Total equity and liabilities | 2,353 |
Statement of profit or loss for year ended 31 December 20X9
Profit before tax
Taxation
Profit after tax
Dividend payments during the year were GH¢230,000.
The following information is also available:
(1) The only new loan raised during the year was a five-year bank loan amounting to GH¢65,000.
(2) Interest charged during the year was GH¢156,000. Interest accrued was GH¢24,000 last year and GH¢54,000 this year.
(3) Depreciation charged during the year amounted to GH¢401,000. This does not include any profit or loss on disposal of non-current assets.
(4) During the year plant which originally cost GH¢69,000 was disposed of for GH¢41,000.
(5) During the year the company issued 200,000 new shares.
Required
Prepare a statement of cash flows.
Answer
SpicyFlare Limited – Statement of cash flows for the year ended 31 December 20X9
| GH¢000 | GH¢000 | |
|---|---|---|
| Cash flows from operating activities | ||
| Profit before taxation | 602 | |
| Adjustments for: | ||
| Depreciation | 401 | |
| Loss on sale of plant (W1) | 4 | |
| Interest charges in the statement of profit or loss | 156 | |
| 561 | ||
| 1,163 | ||
| Increase in receivables (184 – 147) | (37) | |
| Increase in inventories (843 – 203) | (640) | |
| Decrease in trade payables (W2) | (122) | |
| (799) | ||
| Cash generated from operations | 364 | |
| Taxation paid (W3) | (470) | |
| Interest charges paid (W4) | (126) | |
| (596) | ||
| Net cash flow from operating activities | (232) | |
| Cash flows from investing activities | ||
| Purchase of non-current assets | (2,005) | |
| Proceeds from sale of non-current assets (see W1) | 41 | |
| Net cash used in (or received from) investing activities | (1,964) | |
| Cash flows from financing activities | ||
| Proceeds from issue of shares (W5) | 300 | |
| Bank loan raised | 65 | |
| Repayment of loans (W6) | (235) | |
| Dividends paid to shareholders | (230) | |
| Net cash used in (or received from) financing activities | (100) | |
| Net increase/(decrease) in cash and cash equivalents | (2,296) | |
| Cash and cash equivalents at beginning of the year | 51 | |
| Cash and cash equivalents at the end of the year | (2,245) |
Workings
W1: Gain or loss on disposal
| GH¢000 | |
|---|---|
| Cost of asset disposed of | 69 |
| Accumulated depreciation on asset disposed of | (24) |
| Carrying amount at date of disposal | 45 |
| Disposal proceeds | (41) |
| Therefore loss on disposal | 4 |
W2: Increase or decrease in trade payables
| GH¢000 | |
|---|---|
| Trade payables and accruals at 31 December 20X9 | 84 |
| Less accrued interest | (54) |
| 30 | |
| Trade payables and accruals at 31 December 20X8 | 152 |
| Less accrued interest | (24) |
| 128 | |
| Decrease in trade payables and accruals | (122) |
W3: Taxation paid
| GH¢000 | |
|---|---|
| Current taxation liability at 31 December 20X8 | 470 |
| Taxation charge in the year | 602 |
| 1,072 | |
| Current taxation liability at 31 December 20X9 | (602) |
| Therefore taxation paid in the year | 470 |
W4: Interest paid
| GH¢000 | |
|---|---|
| Accrued interest liability at 31 December 20X8 | 24 |
| Interest charge in the year | 156 |
| 180 | |
| Accrued interest liability at 31 December 20X9 | (54) |
| Therefore interest paid in the year | 126 |
W5: Proceeds from the issue of shares
| GH¢000 | |
|---|---|
| Ordinary share capital at 31 December 20X9 | 940 |
| Share premium at 31 December 20X9 | 100 |
| 1,040 | |
| Ordinary share capital at 31 December 20X8 | 740 |
| Share premium at 31 December 20X8 | – |
| 740 | |
| Proceeds from the issue of shares | 300 |
W6: Loans repaid
| GH¢000 | |
|---|---|
| Loans at 31 December 20X8 | 320 |
| New loan during the year | 65 |
| 385 | |
| Loans at 31 December 20X9 | (150) |
| Therefore loans repaid during the year | 235 |
Tutorial note
The accrued interest is removed from the figures because accrued interest is relevant to the amount of interest paid in the year. This is a separate item in the statement of cash flows.
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