Answered: Required: Prepare a statement of cash…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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FAITH is a wholesaler and retailer of office furniture. Extracts from the company’s financial statements are set out below: Statements of comprehensive income for the year ended: 31 March 2009 31 March 2008 GHS’000 GHS’000 GHS’000 GHS’000 Revenue – cash 12,800 26,500 – credit 53,000 65,800 28,500 55,000 ––––––– ––––––– Cost of sales (43,800) (33,000) ––––––– ––––––– Gross profit 22,000 22,000 Operating expenses (11,200) (6,920) Finance costs – loan notes (380) (180) – Overdraft (220) (600) nil (180) ––––––– ––––––– ––––––– ––––––– Profit before tax 10,200 14,900 Income tax expense (3,200) (4,400) ––––––– ––––––– Profit for period 7,000 10,500 Other comprehensive income Gain on property revaluation 5,000 1,200 ––––––– ––––––– Total comprehensive income for the year 12,000 11,700 ––––––– ––––––– Statement of changes in equity for the year ended 31 March 2009: Equity Revaluation Retained Total shares reserve earnings GHS’000 GHS’000 GHS’000 GHS’000 Balances b/f 8,500 2,500 15,800 26,800 Share issue 12,900 12,900 Comprehensive income 5,000 7,000 12,000 Dividends paid (4,000) (4,000) ––––––– ––––––– ––––––– Balances c/f 21,400 7,500 18,800 47,700 ––––––– –––––– ––––––– ––––––– Statements of financial position as at 31 March: 2009 2008 GHS’000 GHS’000 GHS’000 GHS’000 Non-current assets (see note) Cost 93,500 80,000 Accumulated depreciation (43,000) (48,000) ––––––– –––––––– 50,500 32,000 Current assets Inventory 5,200 4,400 Trade receivables 7,800 2,800 Bank nil 13,000 700 7,900 ––––––– –––––––– ––––––– –––––––– Total assets 63,500 39,900 ––––––– –––––––– Equity and liabilities Equity shares of GHS1 each 21,400 8,500 Revaluation reserve 7,500 2,500 Retained earnings 18,800 15,800 ––––––– –––––––– 47,700 26,800 Non-current liabilities 10% loan notes 4,000 3,000 Current liabilities Bank overdraft 3,600 nil Trade payables 4,200 4,500 Taxation 3,000 5,300 Warranty provision 1,000 11,800 300 10,100 ––––––– –––––––– ––––––– –––––––– Total equity and liabilities 63,500 39,900 ––––––– –––––––– Additional information Non-current assets During the year the company redesigned its display areas in all of its outlets. The previous displays had cost GHS10 million and had been written down by GHS9 million. There was an unexpected cost of GHS500,000 for the removal and disposal of the old display areas. Also during the year the company revalued the carrying amount of its property upwards by GHS5 million, the accumulated depreciation on these properties of GHS2 million was reset to zero. All depreciation is charged to operating expenses. Required: Prepare a statement of cash flows for FAITH for the year ended 31 March 2009 in accordance with IAS 7 Statement of Cash Flows by the indirect method.

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