Wilko Ltd had cash and cash equivalents at 1 July 2016 of 10

Wilko Ltd had cash and cash equivalents at 1 July 2016 of $100 000. The transactions of Wilko Ltd for the year to 30 June 2017 are as follows: 1. Borrowed $30 000 with a 6-month loan payable 2. Received $380 000 cash for customer accounts 3. Sold for $40 000 cash a plant asset with a carrying amount of $30 000 4. Issued ordinary shares for $120 000 cash 5. Purchased a plant asset for $87 000; $27 000 in cash and $60 000 vendor loan 6. Exchanged 10 000 shares for land with a fair value of $100 000 7. Received a $40 000 dividend in cash 8. Invested $100 000 cash on the short-term money market 9. Paid fixed-term loan principal of $80 000 and interest of $8000 10. Cash payments for suppliers accounts $250 000 11. Dividend paid during the period $20000 12. Insurance expense shown in the income statement is $14000. At the end of the year the balance sheet shows prepaid insurance expense of $7000. There was a prepaid insurance expense of $6000 at the beginning of the year. Required: Prepare the statement of cash flows of Wilko Ltd for the year to 30 June 2017. (12 marks)

Solution

WILKO LTD

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2017

PARTICULARS ($) ($)

CASH FLOWS FROM OPERATING ACTIVITIES   

CASH RECIEPTS FROM CUSTOMERS 380,000

CASH PAID TO SUPPLIERS (250,000)

CASH FLOW FROM OPERATIONS 130,000

INSURANCE EXPENSE (15,000)

INTEREST PAID (8,000)

NET CASH FLOWS FROM OPERATING ACTIVITIES 107,000   

CASH FLOW FROM INVESTING ACTIVITIES

PROCEEDS FROM SALE OF PLANT 40,000

PURCHASE OF PLANT (27,000)

DIVIDENDS RECIEVED 40,000

NET CASH FLOWS FROM INVESTING ACTIVITIES 53,000

CASH FLOW FROM FINANCING ACTIVITIES

PROCEEDS FROM ISSUE OFSHARES 120,000

PROCEEDS FROM SHORT TERM BORROWINGS 30,000

REPAYMENT OF BORROWINGS (80,000)

DIVIDEND PAID (20,000)

NET CASH FLOW FROM FINANCING ACTIVITIES 50,000

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 210,000

ADD: OPENING CASH AND CASH EQUIVALENTS 100,000

  CLOSING CASH AND CASH EQUIVALENTS 310,000

NOTES

THE PURCHASE OF PLANT USING FINANCE FROM VENDOR (CREDIT) IS NOT A CASH FLOW.

THE EXCHANGE OF SHARES FOR LAND IS NOT A CASH FLOW.

INVESTING IN SHORT TERM MONEY MARKET RESULTS IN EXCHANGE OF CASH FOR CASH EQUIVALENT AS MONEY MARKET IS CASH INSTRUMENT.

INTEREST PAID - OPERATING ACTIVITIES

DIVIDEND RECEIVED - INVESTING ACTIVITIES

DIVIDEND PAID - FINANCING ACTIVITIES