Question

PSB11.10 Below is the information relating to Simic and Nikolic Ltd for the year ended 30 June 2016. Prepare a statement of cash flows, including asset revaluations, bones share ise and transfer to resernes, using direct and indinect methods SIMIC AND NIKOLIC LTD Statement of financial position as at 30 June 2016 (LO3) 2016 2015 $000 $000 Assets Current assets 3150 1240 Cash 1 220 1 100 Accounts receivable Allowance for doubtful debts (60) 1520 60 (50) 1300 Inventory Prepaid insurance 40 Total current assets 5910 3610 Non-current assets Land 1630 1900 1670 Buildings Accumulated depreciation-buildings Plant and equipment Accumulated depreciation-plant and equipment Office equipment Accumulated depreciation-office equipment 2100 (500) (540) 1454 1258 (610) (440) 430 380 (270) (190) 260 Patents 280 4624 Total non-current assets 4188 Total assets $10534 $7798 Liabilities and equity Current liabilities Accounts payable Accrued expenses Interest payable Income tax payable Final dividend payable 750 260 500 280 100 80 1 100 1 120 600 500 Total current liabilities 2810 2480 Non-current liabilities Borrowings 3000 2200 Total liabilities 5810 4680 Equity Share capital Revaluation surplus General reserve Retained earnings 1400 260 1000 300 300 2764 200 1618 Total equity 4724 3118 Total liabilities and equity $10534 $7798 SIMIC AND NIKOLIC LTD Statement of profit or loss for the year ended 30 June 2016 s000 $000 Sales revenue 14126 Gain from sale of land Gain on sale of equipment 210 230 14566 Less expenses Cost of sales 8876 Bad debts expense Depreciation 28 250 Insurance expense Interest expense Amortisation patents Other expenses 140 180 20 1796 11 290 Profit before income tax Income tax expense Current year Under-provision from previous year Profit for the period 3276 1 100 80 1 180 $ 2096 Additional information (dollar amounts expressed in full units) 1. Equipment with an original cost of $500000 was sold during the year 2. Land with an original value of $600 000 was revalued upwards by $160000 during the year 3. A bonus share dividend of $200 000 was paid from the revaluation surplus 4. An interim dividend was paid during the year Required (a) Prepare a statement of cash flows, using the direct method. (b) Reconcile profit to cash provided by operating activities (Hint: This statement of cash flows is more complex, so you will need to reconstruct all the statement of financial position accounts to solve it.)

Answer 1

Simic and Nikolic Ltd

Statement of cash flows (direct method) for the year ended 30th June 2016:

Sr. No.	Particulars	Amount in $'000		Amount in $'000
	Opening cash balance (as on 1st July 2015)			1220
	Cash from investing activities
1	From sale of equipment
	Original cost of equipment sold	500
	Less: Accumulated depreciation on equipment sold [Opening balance $ 610000 plus Depreciation for the year $ 1,30,000($ 250000 - $ 40000 - $ 80000) minus closing balance $ 4,40,000]	(300)
	Add: Gain from sale of equipment	230
	Gross cash receipts on sale of equipment		430
2	From sale of land [Opening balance $ 19,00,000 + Revaluation $ 1,60,000 - Closing balance $ 16,30,000 + Gain on sale $ 2,10,000]		640
3	Purchase of building		(430)
4	Purchase of office equipment		(50)
5	Purchase of plant and equipment		(696)
	Total			(106)
	Cash from financing activities
1	Bonus share dividend paid		(200)
2	Interim dividend paid Retained earnings opening balance $ 16, 18,000 + Profit transferred 20,96,000 - Transfer to general reserve 1,00,000 - closing balance of retained earnings 27,64,000 - Increase in final dividend payable $ 1,00,000 - bonus share dividend $ 2,00,000)		(550)
3	Issue of shares		400
4	Increase in borrowing		800
	Total		450	450
	Cash from operating activities
	Cash from accounts receivable [Opening balance $ 11,00,000 + Sale $ 1,41,26,000 - Bad debts $ 28,000 - Closing balance $ 12,40,000		13,158
	Cash to accounts payable [Opening balance $ 5,00,000 + Cost to sale $ 88,76,000 - Closing balance $ 7,50,000 ]		(8676)
	Inventory purchased		(220)
	Prepaid and current insurance		(160)
	Interest paid		(160)
	Income tax paid		(1200)
	Expenses paid		(1816)
	Total			926
	Total cash flow for the year			2490
	Closing cash balance			3150

Profit for the period $ 20,96,000

Add: Depreciation $ 2,50,000

Less: Gain on sale of assets $ 4,40,000

Add: Bad Debt $ 28,000

Cash profit $ 19,31,000