Question

Ms Sade is a trader operating under the name of 'SA Traders'. She informs you that she consistently adds 33% to the cost of all goods which she sells in order to arrive at selling prices. She presents you with the following financial statements for the years ended 31 March 2000 and 2001. INCOME STATEMENT 2001 2000 Sales net Less cost of sales Gross profit Discount received 471 100 360 900 110 200 1 700 111 900 93 420 18 480 380 000 285 000 95 000 1 100 96 100 66 900 29 200 Operating expenses Net profit transferred to capital account BALANCE SHEET AT 31 MARCH 2001 2000 ASSETS NON-CURRENT ASSETS Furniture at cost Less: depreciation Motor vehicles at cost Less: depreciation 20 000 25 000 5 000 35 000 1 750 20 000 4 000 16 000 16 000 33 250 53 250 194 380 94 630 CURRENT ASSETS Stock Debtors Cash on hand and at bank TOTAL ASSETS 89 900 87 730 16 750 50 000 43 130 1 500 247 630 73 520 110 630 84 500 OWNER'S EQUITY AND LIABILITIES 18 210 Capital Account Balance 1 April Capital introduced Net profit for year 26 130 55 000 18 480 99 610 25 500 29 200 47 410 21 280 Less: drawings 26 130 NON-CURRENT LIABILITIES Long-term loan 74 110 100 000 CURRENT LIABILITIES Creditors Bills payable Bank overdraft 10 970 62 550 35 000 37 500 12 000 TOTAL EQUITY AND LIABILITIES 247 630 110 630 Expenses paid in cash are as follows: Advertising Bank charges Bad debts Manager's commission on sales Delivery charges Depreciation: furniture Depreciation: motor vehicles General expenses Interest on overdraft Motor vehicle running costs Rent Salaries and wages 7 750 490 15 570 23 820 5 020 1 000 1 750 220 500 450 8 160 19 000 5 440 1 000 100 250 2 300 11 000 24 500 93420 12 000 20 000 66 900 Cost of sales Opening stock 1 April Local purchases Overseas purchases Carriage inwards paid in cash 50 000 88 800 250 000 62 000 450 800 89 900 360 900 30 000 105 000 150 000 50 000 335 000 50 000 285 000 Less closing stock 31 March No fixed assets were sold during this year. Additional furniture costing R5 000 was purchased 1 April 2000. The motor vehicles were purchased on 1 April 2000. The loan of R100 000 which bears interest at the rate of 5% p.a. payable in arrear was obtained on 1 April 2000. Required A cash flow statement for the year ended 31 March 2001. [20]

Answer 1

Indirect Method
Cash Flow from Operating Activities
Net Income		$          18,480
Adjustments
Depreciation	$           2,750
Changes in Current Assets/ Current Liabilities
Increase in Debtors	$       -44,600			=43130-87730
Increase in Stock	$       -39,900			=50000-89900
Decrease in Creditors	$       -24,030			=10970-35000
Increase in Bills Payable	$         25,050			=62550-37500
Total Adjustments		$        -80,730
Cash from Operating Activities			$         -62,250
Cash flow from Investing Activities
Purchase of Furniture		$          -5,000
Purchase of Motor Vehicles		$        -35,000
Net cash used In investing activities			$         -40,000
Cash flow from Financing Activities
Capital Introduced		$          55,000
Loan Obtained		$       100,000
Drawings		$        -25,500
Net cash used in financing activities			$         129,500
Increase in Cash			$           27,250
Opening Balance of Cash			$         -10,500	=1500-12000
Closing Balance of Cash			$           16,750

Bank Overdraft has been considered as part of beginning cash