- 20 Marks
FA – L1 – Q98 – Statement of cash flows
Question
The following information has been extracted from the financial statements of Tango Limited for the year ended 31 December 20X9.
Statement of profit or loss for the year ended 31 December 20X9
| GH¢ | GH¢ |
|---|---|
| Sales | |
| Cost of sales | |
| Gross profit | |
| Loss on disposal of non-current asset | (4,000) |
| Wages and salaries | (137,000) |
| Other expenses (including depreciation GH¢46,000) | (193,000) |
| Interest charges | (19,000) |
| Profit before tax | |
| Tax on profit | |
| Profit after tax |
The asset disposed of had a carrying amount of GH¢31,000 at the time of the sale.
Extracts from the statements of financial position:
| At 1 January 20X9 | At 31 December 20X9 | |
|---|---|---|
| GH¢ | GH¢ | |
| Non-current assets | 157,000 | 142,000 |
| Inventory | 42,000 | 45,000 |
| Receivables | 43,600 | 51,000 |
| Cash and cash equivalents | 4,000 | 11,200 |
| Trade payables | 45,000 | 41,000 |
| Taxation payable | 10,000 | 12,000 |
| Interest payable | 3,000 | 2,000 |
Note on non-current assets
| Land and buildings | Machinery | Fixtures & fittings | Total | |
|---|---|---|---|---|
| GH¢000 | GH¢000 | GH¢000 | GH¢000 | |
| Cost or valuation | ||||
| At 31 December 20X8 | 830 | 470 | 197 | 1,497 |
| Additions | – | 43 | 55 | 98 |
| Disposals | – | (18) | – | (18) |
| Adjustment on revaluation | 70 | – | – | 70 |
| At 31 December 20X9 | 900 | 495 | 252 | 1,647 |
| Depreciation | ||||
| At 31 December 20X8 | (90) | (270) | (180) | (540) |
| Charge for the year | (10) | (56) | (8) | (74) |
| Disposals | – | 12 | – | 12 |
| Adjustment on revaluation | 100 | – | – | 100 |
| At 31 December 20X9 | 0 | (314) | (188) | (502) |
| Carrying amount: | ||||
| At 31 December 20X8 | 740 | 200 | 17 | 957 |
| At 31 December 20X9 | 900 | 181 | 64 | 1,145 |
You have been informed that included within distribution costs is GH¢4,000 relating to the loss on a disposal of a non-current asset.
Required
Prepare a statement of cash flows for Tango Limited for the year ended 31 December 20X9.
Answer
Tango LIMITED
Statement of cash flows: direct method
| GH¢ | GH¢ | |
|---|---|---|
| Cash flows from operating activities | ||
| Cash receipts from customers (W1) | 1,226,600 | |
| Cash payments to suppliers (W4) | (762,000) | |
| Cash payments to employees (W2) | (137,000) | |
| Cash paid for other operating expenses (W4) | (147,000) | |
| Cash generated from operations | 180,600 | |
| Taxation paid (W5) | (32,000) | |
| Interest charges paid (W5) | (20,000) | |
| Net cash flow from operating activities | 128,600 | |
| Cash flows from investing activities | ||
| Purchase of non-current assets | (98,000) | |
| Proceeds from sale of non-current assets (W6) | 27,000 | |
| Net cash used in investing activities | (71,000) | |
| Cash flows from financing activities | ||
| Dividends paid | (50,400) | |
| Net cash used in financing activities | (50,400) | |
| Net increase in cash and cash equivalents | 7,200 | |
| Cash and cash equivalents at 1 January 20X9 | 4,000 | |
| Cash and cash equivalents at 31 December 20X9 | 11,200 |
Workings
W1: Cash receipts from customers
| GH¢ | |
|---|---|
| Receivables at 1 January 20X9 | 43,600 |
| Sales in the year | 1,234,000 |
| Receivables at 31 December 20X9 | (51,000) |
| Cash received from customers | 1,226,600 |
W2: Wages and salaries
Wages and salaries per statement of profit or loss: GH¢137,000
Assume all wages and salaries are paid in cash as there is no indication of accruals.
W3: Purchases
| GH¢ | |
|---|---|
| Closing inventory at 31 December 20X9 | 45,000 |
| Cost of sales | 763,000 |
| Opening inventory at 1 January 20X9 | (42,000) |
| Purchases in the year | 766,000 |
W4: Cash paid for materials supplies
| GH¢ | |
|---|---|
| Trade payables at 1 January 20X9 | 45,000 |
| Purchases in the year (W3) | 766,000 |
| Trade payables at 31 December 20X9 | (41,000) |
| Cash paid for materials | 762,000 |
Cash paid for other expenses is the amount for expenses in the statement of profit or loss after deducting the depreciation charge: GH¢193,000 – GH¢46,000 = GH¢147,000.
W5: Interest and tax payments
| Tax | Interest | |
|---|---|---|
| GH¢ | GH¢ | |
| Liability at 1 January 20X9 | 10,000 | 3,000 |
| Taxation charge/interest charge for the year | 34,000 | 19,000 |
| Liability at 31 December 20X9 | (12,000) | (2,000) |
| Tax paid/interest paid during the year | 32,000 | 20,000 |
W6: Proceeds from sale of non-current asset
| GH¢ | |
|---|---|
| Carrying amount | 31,000 |
| Loss on disposal | (4,000) |
| Proceeds from sale | 27,000 |
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