Melanie Ltd requires a Statement of Cash Flows to be prepared for the year ended
ID: 2542502 • Letter: M
Question
Melanie Ltd requires a Statement of Cash Flows to be prepared for the year ended 31 March 2017; the following information has besn provided for this purpose. As at 31 March Cash Accounts receivable Inventor Prepaid operating expenses Plant and Equipment Accumulated de Accounts pavable Long term liabilities Share capital Retained profits 2017 $55 000 20 000 15 000 5 000 317 000 14 000 34 000 130 000 70 000 164 000 2016 33 000 30 000 10 000 1 000 70 000 6 000 20 000 20 000 50 000 48 000 ation For the vear ended 31 March Sales Less e $507 000 nses COGS 150 000 9 000 42 000 3 000 111 000 192 000 47 000 $145 000 eciation e Interest e Loss on sale of e ent ses Profit before tax Less Income tax expense Profit after tax Additional information (i) During the year ended 31 March 2017 an item of equipment, which originally cost $8 000 was sold. (ii) Melanie Ltd uses the direct method for presenting cash flows from operating activities. (ii) Classify any dividends paid and interest paid as cash flows from financing activities. iv) Sexeral items of plant and equipment were purchased during the year ended 31 March 2017; a long-term liability of $110 000 was specifically arranged for the purchases. Required Prepare a Statement of Cash Flows for Melanie Ltd, for the year ended 31 March 2017, in accordance with NZ IAS 7 Statement of Cash Flows. A reconciliation is required to be prepared GST is not applicable. All workings, in the form of selected general ledger accounts, must bs proxided.Explanation / Answer
Solution
Cash Flow Statement
Melanie Ltd
31st March 2017
Particulars
Amount ($)
Amount ($)
A. Cash flow from operating activities
Net Profit before tax
192,000
Add: Depreciation expense
9,000
Add: Loss on sale of equipment
3,000
Add: Interest expense
42,000
Operating profit before working capital changes
246,000
Add: Decrease in Accounts Receivable
10,000
Add: Increase in Accounts Payable
14,000
Less: Increase in Inventory
(5,000)
Less: Increase in Prepaid operating expenses
(4,000)
Profit before tax
261,000
Less: Income tax expense
(47,000)
Net Cash flow from operating activities
214,000
B. Cash flow from Investing activities
Sale of equipment
5,000
Purchase of Plant and equipment
(256,000)
Net Cash used in investing activities
(251,000)
C. Cash flow from Financing activities
Long term liability
110,000
Issue of share capital
20,000
Interest Paid
(42,000)
Dividend Paid
(29,000)
Net Cash flow from financing activities
59,000
Net Increase / Decrease in cash and cash equivalents (A+B+C)
22,000
Add: Beginning Cash balance
33,000
Ending cash balance
55,000
Working Notes:
(1)Plant & Equipment Account
Particulars
Debit
Amount ($)
Particulars
Credit
Amount ($)
Beginning Balance
70,000
Sale of Equipment (cash)
5,000
Purchase (Balancing Figure)
256,000
Accumulated Depreciation
1,000
Loss on sale
3,000
Ending Balance
317,000
Total
326,000
Total
326,000
(2)Accumulated Depreciation Account
Particulars
Debit
Amount ($)
Particulars
Credit
Amount ($)
Transfer of Accumulated Depreciation on equipment sold
(Balancing Figure)
1,000
Beginning Balance
6,000
Ending Balance
14,000
Current Year Depreciation (Given)
9,000
Total
15,000
Total
15,000
(3)Long term Liability Account
Particulars
Debit
Amount ($)
Particulars
Credit
Amount ($)
Beginning Balance
20,000
Cash for equipment purchase (Balancing figure)
110,000
Ending Balance
130,000
Total
130,000
Total
130,000
(4)Share Capital Account
Particulars
Debit
Amount ($)
Particulars
Credit
Amount ($)
Beginning Balance
50,000
Ending Balance
70,000
Cash (Issue of shares)- Balancing Figure
20,000
Total
70,000
Total
70,000
(5)Calculation of Dividend Paid
Ending Retained earning = Beginning Retained earning +Profit after tax –Dividend Paid
$ 164,000 = $ 48,000 + $ 145,000 - Dividend Paid
Dividend Paid= $ 145,000 + $ 48,000 -$ $ 164,000
= $ 29,000
(6) Selling Price of equipment
= Cost of equipment – Loss on sale
=$ 8,000 - $ 3,000
=$ 5,000
Particulars
Amount ($)
Amount ($)
A. Cash flow from operating activities
Net Profit before tax
192,000
Add: Depreciation expense
9,000
Add: Loss on sale of equipment
3,000
Add: Interest expense
42,000
Operating profit before working capital changes
246,000
Add: Decrease in Accounts Receivable
10,000
Add: Increase in Accounts Payable
14,000
Less: Increase in Inventory
(5,000)
Less: Increase in Prepaid operating expenses
(4,000)
Profit before tax
261,000
Less: Income tax expense
(47,000)
Net Cash flow from operating activities
214,000
B. Cash flow from Investing activities
Sale of equipment
5,000
Purchase of Plant and equipment
(256,000)
Net Cash used in investing activities
(251,000)
C. Cash flow from Financing activities
Long term liability
110,000
Issue of share capital
20,000
Interest Paid
(42,000)
Dividend Paid
(29,000)
Net Cash flow from financing activities
59,000
Net Increase / Decrease in cash and cash equivalents (A+B+C)
22,000
Add: Beginning Cash balance
33,000
Ending cash balance
55,000