Question

ACC201: Financial Accounting

WIN Pte Ltd is a company incorporated in Singapore and uses the Singapore FRSs. Its financial year end is 31 December. It is in the retail business.

The comparative statement of financial position and extract of income statement for WIN Pte Ltd are given as follow:

WIN Pte Ltd Comparative statement of financial position 31 December, 20X3 and 20X2
	20X3		20X2
	$’000		$’000
Assets
Current Assets:
Cash	374		198
Accounts receivable	588		380
Inventory	680		542
Non-current Assets:
Equipment, net	9,400		10,200
Total assets	11,042		11,320
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable	922		686
Salaries payable	216		298
Interest payable	8		2
Dividend payable	16		0
Income tax payable	200		0
Non-current Liabilities
Bonds payable	1,400		600
Shareholders' equity
Share capital	8,000		9,600
Retained earnings	280		134
Total liabilities & Shareholders’ Equity	11,042		11,320

WIN Pte Ltd Income Statement (extract) For the year ended 31 December 20X3
	$’000
Sales	13,966
Cost of sales	(4,468)
Gross profit	9,498
Loss on disposal of equipment	(80)
Distribution costs	(3,352)
Administrative expenses	(4,972)
Depreciation expense	(160)
Interest expense	(60)
Profit before tax	876
Taxation	(302)
Profit after taxation	572

Additional information:

1. 1. There was no other purchase of non-current assets during the year.
2. 2. The reduction in share capital balance is due to a buyback of shares. The shares were bought back using cash. No other share-related transaction occurred.
3. 3. The company’s practice is to classify interest receipts/payments and dividend receipts under operating cashflows and dividend payments under financing cashflow on the Statement of Cash Flows.
4. 4. When preparing the Statement of Cash Flows, the company’s practice is to present the section on cash flows from operating activities using the indirect method.

Required:

Prepare the statement of cash flows for WIN Pte Ltd for the year ended 31 December 20X3. (25 marks)

Answer 1

Answer :

**Please note that Profit before Tax is $ 874. It is wrongly computed in the table as $ 876

WIN Pte Ltd Statement of Cash Flows (Indirect Method)
For the Year Ended December 31,20X3
	$	$
Cash Flows From Operating Activities
Adjustments to reconcile net income to net cash flows from operating activities
Net Income	874.00
Adjustments for non cash effects :
Add : Depreciation expense	160.00
Loss on sale of plant asset	80.00
Less: Tax Paid	(302.00)
Changes in current assets and current liabilities:
Increase in accounts receivables	(208.00)
Increase in inventories	(138.00)
Increase in accounts payables	236.00
Decrease in Salaries payable	(82.00)
Increase in Interest payables	6.00
Increase in Dividend payables	16.00
Increase in Income Tax payables	200.00
Net cash flows from operating activities		842.00
Cash Flows from Investing Activities
Cash received on sale of equipment	560.00
Net cash flows from investing activities		560.00
Cash Flows from Financing Activities
Add:
Increase in Bonds payable	800.00
Less:
Payment of dividend	(426.00)
Buyback of Shares	(1,600.00)
Net cash flows from financing activities		(1,226.00)
Net increase (decrease) in cash		176.00
Cash at the beginning of the period		198.00
Cash at the end of the period		$ 374.00

Working Notes :

1. Changes in Current assets and liabilities:

Current Assets / Liabilities	20X3	20X2	Difference
Accounts Receivable	588	380	+ 208
Inventory	680	542	+ 138
Accounts payable	922	686	+ 236
Salaries payable	216	298	- 82
Interest payable	8	2	+ 6
Dividend payable	16	0	+ 16
Income tax payable	200	0	+ 200

2. Calculation of Sale value of equipment -

Opening value of equipment	$10,200
Less: Current value of equipment(gross)	(9560)
Cost of Equipment sold	$ 640
Less: Loss on sale	(80)
Sale Proceeds from equipment	$ 560

3. Calculation of Dividend paid: Previous year Retained earnings + current year profit - current year retained earnings balance = 134+572-280 = $ 426