Exercise 1711 A summarised comparative statement of...

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1 School of Accounting, Economics and Finance ACCY200: FINANCIAL ACCOUNTING IIA Autumn 2020 Week 12 Tutorial Solutions Attempt questions before tutorial: Ex.17.11 Part 2; Ex.17.12 Operating Activities; Ex.17.15 Part 4 Attempt question during tutorial: Ex.17.16 Operating Activities Exercise 17.11 A summarised comparative statement of financial position of Findlay Ltd is presented below. 30 June 2021 30 June 2022 Cash $ 40 000 $ 182 000 Trade accounts receivable 130 000 180 000 Inventories 116 000 124 000 Prepayments 20 000 24 000 Land 160 000 180 000 Plant 540 000 640 000 Accumulated depreciation (120 000) (184 000) $ 906 000 $ 1 146 000 Accounts payable $ 90 000 $ 96 000 Borrowings 320 000 400 000 Share capital 400 000 460 000 Retained earnings 96 000 190 000 $ 906 000 $ 1 146 000 Additional information There were no disposals of land or plant during the year. A $60  000 borrowing was settled through the issue of ordinary shares. There were no other repayments of borrowings. Profit for the year was $240  000, interest expense was $28  000, and income tax expense was $82  000. There were no items of other comprehensive inco me. A $146  000 dividend was paid during the year. Sales revenue for the year was $600  000. There was no other revenue. Required 2. Prepare the operating section of the statement of cash flows using the direct method.
2 Cash received from customers : = $600 000 + $130 000 – $180 000 = $550 000 Or Trade Accounts Receivable $ $ Beg. 130 000 Receipts 550 000 Sales 600 000 End 180 000 730 000 730 000 Cash payments to suppliers & employees: In the absence of details for COS and other expenses, this cannot be split into two separate calculations. We can however determine all relevant expenses (ie, COS and cash expenses) as one total. Sales – expenses = profit $600 000 – x = $240 000 X = $360 000 Total expenses – non-cash expenses – non operating expenses – interest expense – income tax expense = COS + cash expenses = $360 000 – depreciation expense - $28 000 - $82 000 = $250 000 – [$184 000 - $120 000] = $186 000 Thus T accounts will not be useful as we cannot split this total any further into COS and cash expenses [COS + cash expenses] + ending inventory – beginning inventory + beginning accounts payable – ending accounts payable + ending prepayments – beginning prepayments = $186 000 + $124 000 - $116 000 + $90 000 - $96 000 + $24 000 - $20 000 = $192 000 Cash paid for interest and income tax is equal to the expense as there are no accrual accounts 2. Cash from operations presented using the direct method: Cash flows from operating activities $ Cash received from customers 550 000 Cash paid to suppliers of goods and services (192 000) Interest paid (28 000) Income tax paid (82 000) Net cash from operating activities 248 000
3 Exercise 17.12 A summarised comparative statement of financial position of Danica Ltd is presented below, together with the statement of profit or loss and other comprehensive income for the year ended 30 June 2022. 30 June 2021 30 June 2022 Cash $ 30 000 $ 68 000 Trade receivables 46 000 70 000 Inventories 30 000 32 000 Investments at fair value through OCI 35 000 40 000 Plant 125 000 150 000 Accumulated depreciation (23 000) (35 000) $ 243 000 $ 325 000 Accounts payable $ 39 000 $ 43 000 Accrued interest 3 000 5 000 Current tax payable 10 000 12 000 Deferred tax liability 1 500 Borrowings 60 000 100 000 Share capital 100 000 100 000 Retained earnings 31 000 60 000 Investment revaluation reserve 3 500 $ 243 000 $ 325 000 DANICA LTD

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