QUESTION 2 Baker Street Enterprises Ltd is a manufacturer of

QUESTION 2 Baker Street Enterprises Ltd is a manufacturer of wax models, which are sold to retailers. The abbreviated Income Statement for 2014 and Statements of Financial Position for 2013 and 2014 are as follows ome state nde Revenue Cost of sales Gross profft Operating expenses Depreciation Operating profit Interest payable Profit before taxation Taxation Profit for the year 2014 £000 1200 (750) 450 (208) (75) 167 159 2013 2014 £000 ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade receivables Cash 148 102 236 Total assets 9551083 EQUITY AND LIABILITIES Equity Ordinary share capital (E1, fully paid) Retained earnings 500 256 500 29 Non-current liabilities Borrowings-bank loan Current liabilities Trade payables Other payables and accruals Taxation Short-term borrowings (overdraft) 18 40 76 16 24 238 9551083 199 Total equity and liabilities

Solution

a Baker Street Enterprises Statement of Cash Flows £0.00 Cash flows from operating activities: Net income 111 Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Depreciation expense 75 Changes in current operating assets and liabilities Trade receivable increase -54 Inventory increase -88 Trade payable increase 16 Others payable and accruals decrease -2 Short-term borrowing increase 41 Payment of tax -16 Net cash provided by operating activities 83 Cash flows from investing activities Purchase of Property, plant, and equipment -60 Net cash used in investing activities -60 Cash flows from financing activities Borrowed - Bank Loan 50 Cash dividends paid -72 Net cash provided by financing activities -22 Net increase in cash 1 Cash, July 1, 2013 3 Cash, June 30, 2014 4 b Profit are related financial measurement statement in accounting, it is a measure of a company\'s ongoing sustainability.It is not a measure of the company\'s ability to pay its bills as they become due, so to know the ability pay the dues and bills the need to prepare cash flow statement.