You are presented with the following information:
Ukunda Ltd.
Income Statement for the Year
To 31 December 2013
Sh. |
Sh. |
|
Sales |
1,000 |
|
Less: cost of goods sold |
||
Opening stock |
200 |
|
Purchases |
700 |
|
900 |
||
Less: closing stock |
300 |
600 |
Gross profit |
400 |
|
Operating expenses |
(240) |
|
Operating profit |
160 |
|
Debenture interest |
(10) |
|
Net profit before taxation |
150 |
|
Taxation |
(150) |
|
Net profit after taxation |
100 |
|
Dividends |
(60) |
|
Retained profit for the year |
40 |
Ukunda Ltd.
Statement of Financial Position
At 31 December 2013
2012 |
2013 |
|||
Sh. |
Sh. |
Sh. |
Sh. |
|
Fixed assets at cost |
900 |
1,050 |
||
Less: Accumulated depreciation |
150 |
750 |
255 |
795 |
Current assets |
||||
Stocks |
200 |
300 |
||
Trade debtors |
120 |
150 |
||
Cash |
20 |
45 |
||
340 |
495 |
|||
Less: current liabilities |
||||
Trade creditors |
70 |
90 |
||
Taxation |
40 |
50 |
||
Proposed dividend |
30 |
60 |
||
140 |
200 |
200 |
295 |
|
950 |
1,090 |
|||
Capital and reserves |
||||
Ordinary shared at Sh. 1 each |
750 |
750 |
||
Profit and loss account |
200 |
240 |
||
950 |
990 |
|||
Loans |
||||
Debentures stock (10% issued 1st) |
||||
January 2013 |
100 |
|||
950 |
1,090 |
Required:
(a) Using either the direct or the indirect method, prepare a statement of cash flows for Ukunda Ltd. for the year ended 31 Dec. 2013.
[16 marks]
(b) Briefly explain why change in cash and cash equivalents during an accounting period is not equal to profits earned by a company during the same period. [4 marks]
show your working
Answer
1. Cash Flow Statement :
Answer 2.
cash genertaed from operting activities is quite higher than profit goes to retained earnings.
Cash flow statement clearly show that this year investment is made in Fixed Assets which is partialy financed by Debentures issued and partialy by operating revenue.
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