Set out below are the financial statements of Shabnum Co. You are the financial controller, faced with the task of implementing IAS statement of Cash Flows.
SHABNUM CO
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20X2
| Revenue | 9,000 |
| Cost of sales | (6,750) |
| Gross Profit | 2,250 |
| Distribution costs | (450) |
| Administrative expenses | (562.5) |
| 1,238 | |
| Interest received | 247.5 |
| Interest paid | (495) |
| Profit before tax | 990 |
| Taxation | (198) |
| Profit for the period | 792 |
SHABNUM CO
STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER
| 31.12.20X2 | 31.12.20X1 | |
| NON-CURRENT ASSETS | ||
| Plant | 192 | 128 |
| Intangible assets | 270 | 180 |
| Investments | 50 | |
| Current Assets | ||
| Inventory | 756 | 630 |
| Receivable | 1,874 | 309 |
| Short tem investments | 60 | |
| Cash in hand | 20 | 10 |
| Total | 3,172 | 1,307 |
| 31.12.20X2 | 31.12.20X1 | |
| EQUITY | ||
| Share Capital ($1 ordinary shares) | 1,200 | 800 |
| Share Premium account | 170 | 90 |
| Revaluation reserve | 66 | 60 |
| Retained Earnings | 745 | 7 |
| Non-Current Loan | 540 | 90 |
| Current liabilities | ||
| Trade payables | 135 | 90 |
| Bank overdraft | 168 | 120 |
| Taxation | 148 | 50 |
| Total | 3,172 | 1,307 |
The following information is available.
(a) The proceeds of the sale of non-current asset investments amounted to $60.
(b) Fixtures and fittings, with an original cost of $40 and a net book value of $ 16 , were sold for $12.8 during the year.
(c) the following information relates to property, plant and equipment.
| 31.12.20X2 | 31.12.20X1 | |
| Cost | 480 | 320 |
| Accumulated Depreciation | 288 | 192 |
| Net Book Value | 192 | 128 |
(d) 400 $1 ordinary shares were issued during the year at a premium of 20c per share.
(e) Dividends totalling $54 were paid during the year.
Required.
Prepare a statement of cash flows for the year to 31 December 20X2 using the format laid out in IAS 7.
Suggested Solutions
Working
(a) The proceeds of the sale of non-current asset investments amounted to $60. $60 inflow, investing activities. The profit of $10 is to be deducted from operating activities.
(b) Fixtures and fittings, with an original cost of $40 and a net book value of $ 16 , were sold for $12.8 during the year. Sales proceed $12.8. Inflow, investing activities. The loss of $3.2 is to be added back to operating act as inflow.
(c) the following information relates to property, plant and equipment.
| 31.12.20X2 | 31.12.20X1 | |
| Cost | 480 | 320 |
| Accumulated Depreciation | 288 | 192 |
| Net Book Value | 192 | 128 |
Plant ob + purchase + revaluation -disposal = Plant cb
320 + purchase + 6 - 40 =480
Purchase = 194 out flow, investing activities.
Accumulated depreciation ob + depreciation of the year -depreciation of disposed asset =Accumulated depreciation cb.
192 + depreciation of the year -24 = 288
Depreciation of the year = 288 -192 +24
=120 inflow, operating activities.
(d) 400 $1 ordinary shares were issued during the year at a premium of 20c per share. $480 has been received. Inflow, financing activities.
(e) Dividends totalling $54 were paid during the year. $54 were paid . Outflow, operating activities
(f) Cash and Cash equivalents for year X1 = Cash in hand - Bank overdraft
= $10 -$ 120
=-110
Cash and Cash equivalents for year X2 = Short term investment + Cash in hand -Bank overdraft
$60 +$ 20 - $168
= $-88
SHABNUM CO
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 20X2
| Net cash flows from operating activities | ||
| Profit before tax | 990 | |
| Depreciation charge | 120 | |
| interest received | (247.5) | |
| Interst paid | 495 | |
| Loss on sale of plant | 3.2 | |
| Profit on sale of non-current asset investments | (10) | |
| inventories | (126) | |
| Receivables | (1565) | |
| Payables | 45 | |
| Cash generated from operating activities | -295.3 | |
| interest received | 247.5 | |
| Interest paid | (495) | |
| Dividend paid | (54) | |
| Tax paid | (100) | |
| Net Cash flow from operating activities | -696.8 | |
| Cash flows from investing activities | ||
| Payment to acquire plant | (194) | |
| payment to acquire intangible non-current assets | (90) | |
| Receipts from sale of plant | 12.8 | |
| Receipts from sale of non-current investment | 60 | |
| Net cash flows from investing activities | -211.2 | |
| Cash flows from financing activities | ||
| Issure of share capital | 480 | |
| Long-term loan | 450 | |
| Net cash flows from financing | 930 | |
| Increase in cash and cash equivalents | 22 | |
| Cash and cash equivalents at 1.1. X2 | -110 | |
| Cash and cash equivalents at 31.12.X2 | -88 |
To do the same topic again in ACCA F3 prepare cash flows statement