Additional information 1 Extract of the statement of profit or loss for the

Additional information 1 extract of the statement of

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Additional information: 1. Extract of the statement of profit or loss for the year ended 31 December 2015: RM’000 Net profit before tax 8,390 Loss on disposal of plant 220 Depreciation expense 2,450 Amortisation of intangibles 250 Tax expenses 7,500 2. Marketable securities qualify as cash and cash equivalent. 3. During the current year, a piece of plant with a carrying value of RM3,800,000 was sold for cash of RM3,580,000. 4. The provision was related to a legal suit for unlawful environmental action. The company’s lawyers were of the opinion that Palam Indah would be held liable. 5. New ordinary shares were issued and dividend was paid during the year. Required: a. Prepare a Statement of Cash Flows for the year ended 31 December 2015 using the indirect method and in accordance with MFRS 107 Statement of Cash Flows . (20 marks) b. Comment on the investing activities and financing activities of Palam Indah Bhd. 8
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(5 marks) (Total: 25 marks) SOLUTION 3 PALAM INDAH BHD Statement of Cash Flows for the Year Ended 31 December 2015 Cash flows from operating activities: RM RM Net profit before tax 8,390,000 Adjustments: Depreciation expense 2,450,000 Amortization of intangibles 250,000 Loss on disposal of plant 220,000 Increase in provision for damages 720,000 Working capital changes: Decrease in inventories 1,320,000 √√ Decrease in trade receivables 1,660,000 √√ Decrease in trade payables (330,000) √√ + (√) Cash generated from operations 14,680,000 Taxes paid (7,280,000) √√ + (√) Net cash flow from operating activities 7,400,000 Cash flows from investing activities: Purchase of plant and machinery (1,750,000) √√√√ + (√) Proceeds from disposal of plant 3,580,000 Purchase of intangibles (850,000) √√√ + (√) Net cash flow from investing activities 980,000 Cash flows from financing activities : Proceeds from issue of shares 2,060,000 √√ Repayment of bank loan (3,500,000) √√ + (√) Dividend paid (340,000) √√√√ + (√) Net cash flow from financing activities (1,780,000) Net Increase in Cash and Cash Equivalents 6,600,000 Cash and cash equivalents at beginning of year 2,550,000 √√√ Cash and cash equivalents at end of year 9,150,000 √√ (40 √ @ ½ = 20 marks) Workings: Cash & Cash equivalents : 2014 2015 Bank 2,000 10,600 Marketable securities 1,800 - Overdraft (1,250) (1,450) 2,550 9,150 9
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TAXATION Bank 7,280,000 SOPL – Tax expense 7,500,000√ Tax payable c/f 220,000√ 7,500,000 7,500,000 PROPERTY, PLANT AND EQUIPMENT Balance b/d 100,500,000 Depreciation 2,450,000√ Disposal 3,800,000√ Bank 1,750,000 Balance c/d 96,000,000 102,250,000 102,250,00 Dividend paid: 91,020 – 90,470 – 890 = 340 a. Comment There is positive cash inflows / from investing activities. Due to the disposal of plant / and was able to cover additional acquisition of non-current assets. Purchase of plant and machinery and purchase of intangibles // (2 marks) There is negative cash outflows / from financing activities. The financing cash outflows showed that the company made payments / for borrowings (Repayment of bank loan) / and payments for dividends. / There was also cash inflows / by issuance of new shares / which partly covered the above payments. (3 marks) (Total: 25 marks) 10
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