Income statement 2021 £,000 Sales 7000 Cost of sales -3000 Gross profit 4000 Administration and distribution expenses -1000 Interest payable -500 Dividend received 600 Profit before tax 3100 Taxation -1000 Profit after tax 2100 Balance Sheet 2021 2020 £'000 £'000 £'000 £'000 Assets: Non-Current Assets Property, plant and equipment 13000 10000 Investment 3000 3000 16000 13000 Current Assets Inventories 5500 5000 Trade receivables 2500 4500 Cash at bank 1000 9000 0 9500 Total Assets 25000 22500 Equity and Liabilities: Share capital 6000 5000 Share premium account 3000 2000 Retained earnings 3900 3000 12900 10000 Liabilities: Non-Current Liabilities Long-term loans 8000 9000 Current Liabilities Trade payables 3000 2000 Accrued interest payable 100 0 Taxation 1000 900 Bank overdraft 0 4100 600 3500 Total Equity and Liabilities 25000 22500 The following information is also available. 1) Administration and selling expenses include employee salaries of £ 500,000 and equipment depreciation of £ 300,000. 2) There were no non-current asset disposals during the year to 31 December 2021. 3) A dividend of £ 1,200,000 was paid in December 2021. Required: a. Prepare the statement of cash flows for Chichester Limited for the year ending on 31 December 2021 in accordance with the requirements of IAS 7. b. According to the requirements of IAS 7, prepare to demonstrate that the direct method would give the same figure for the 'Cash generated from operations as given in (a) above when the indirect method is used.

Income statement 2021 £,000 Sales 7000 Cost of sales -3000 Gross profit 4000 Administration and distribution expenses -1000 Interest payable -500 Dividend received 600 Profit before tax 3100 Taxation -1000 Profit after tax 2100 Balance Sheet 2021 2020 £'000 £'000 £'000 £'000 Assets: Non-Current Assets Property, plant and equipment 13000 10000 Investment 3000 3000 16000 13000 Current Assets Inventories 5500 5000 Trade receivables 2500 4500 Cash at bank 1000 9000 0 9500 Total Assets 25000 22500 Equity and Liabilities: Share capital 6000 5000 Share premium account 3000 2000 Retained earnings 3900 3000 12900 10000 Liabilities: Non-Current Liabilities Long-term loans 8000 9000 Current Liabilities Trade payables 3000 2000 Accrued interest payable 100 0 Taxation 1000 900 Bank overdraft 0 4100 600 3500 Total Equity and Liabilities 25000 22500 The following information is also available. 1) Administration and selling expenses include employee salaries of £ 500,000 and equipment depreciation of £ 300,000. 2) There were no non-current asset disposals during the year to 31 December 2021. 3) A dividend of £ 1,200,000 was paid in December 2021. Required: a. Prepare the statement of cash flows for Chichester Limited for the year ending on 31 December 2021 in accordance with the requirements of IAS 7. b. According to the requirements of IAS 7, prepare to demonstrate that the direct method would give the same figure for the 'Cash generated from operations as given in (a) above when the indirect method is used.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 8EP

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Income statement
	2021
	£,000
Sales	7000
Cost of sales	-3000
Gross profit	4000
Administration and distribution expenses	-1000
Interest payable	-500
Dividend received	600
Profit before tax	3100
Taxation	-1000
Profit after tax	2100

Balance Sheet
		2021		2020
	£'000	£'000	£'000	£'000
*Assets:*
Non-Current Assets
Property, plant and equipment		13000		10000
Investment		3000		3000
		16000		13000
Current Assets
Inventories	5500		5000
Trade receivables	2500		4500
Cash at bank	1000	9000	0	9500
Total Assets		25000		22500
*Equity and Liabilities:*
Share capital		6000		5000
Share premium account		3000		2000
Retained earnings		3900		3000
		12900		10000
*Liabilities:*
Non-Current Liabilities
Long-term loans		8000		9000
Current Liabilities
Trade payables	3000		2000
Accrued interest payable	100		0
Taxation	1000		900
Bank overdraft	0	4100	600	3500
Total Equity and Liabilities		25000		22500

The following information is also available.

1) Administration and selling expenses include employee salaries of £ 500,000 and equipment depreciation of £ 300,000.

2) There were no non-current asset disposals during the year to 31 December 2021.

3) A dividend of £ 1,200,000 was paid in December 2021.

Required:

a. Prepare the statement of cash flows for Chichester Limited for the year ending on 31 December 2021 in accordance with the requirements of IAS 7.

b. According to the requirements of IAS 7, prepare to demonstrate that the direct method would give the same figure for the 'Cash generated from operations as given in (a) above when the indirect method is used.

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