Question7 These are the account balances of Berrimah Ltd as

Question7 These are the account balances of Berrimah Ltd as at 30 June 2016 and 30 June 2017 2017 (S000) 250 130 2016 (S000) 350 110 Sales (all on credit) Cost of goods sold Doubtful debts expense Interest expense 20 30 10 144 180 270 30 150 100 30 25 15 139 160 250 35 150 Cash Accounts receivable Allowance for doubtful debts Accumulated depreciation Bank overdraft Accounts payable Accrued salaries Long-term loan Share capital Opening retained earnings 20 190 18 70 100 120 Additional information: The share capital was increased by the bonus issue of 20,000 shares valued at S1.00 each out of retained earnings. Plant was purchased during the period at a cost of $30.000, with plant with a carrying amount of Snil (cost of $20,000; accumulated depreciation of $20,000) being scrapped. Prepare a statement of cash flows for Berrimah Ltd for the year ending 30 June 2017 showing in Note 1 the reconciliation of net profit to net cash from operating activities and Note 2 showing the reconciliation of cash balances (Recommended time: 60minutes(Marks:34)

Solution

Answers 7

INCOME STATEMENT

The Sales revenue

$250,000

The Cost of goods sold

$130,000

The Gross Profit

$120,000

The Doubtful debt expense

$25,000

The interest expense

$20,000

The Salaries

$30,000

The Depreciation

$10,000

The Net Profit

$35,000

CASH FLOWS FROM OPERATING ACTIVITIES

Net Profit

$35,000

Add: Non cash expense of Depreciation

$10,000

Cash flows including depreciation

$45,000

Decrease/(Increase) in current assets:

Inventory

($20,000)

(160-180)

Accounts Receivable

($20,000)

(250-270)

Increase/(Decrease) in current liabilities

Accounts payable

$10,000

(200-190)

Accrued salaries

$4,000

(22-18)

Allowance for doubtful debt

($5,000)

(30-35)

Net Cash flow from operating activities

$14,000

CASH FLOWS FROM INVESTING ACTIVITIES

Plant

($30,000)

Total cash flow from Investing activities

($30,000)

CASH FLOWS FROM FINANCING ACTIVITIES

Bank Overdraft

$1,000

(20-19)

Long term loan

$20,000

(90-70)

Total cash flow from financing activities

$21,000

Net Cash Flow

$5,000

(14000-30000+21000)

Cash at the beginning of the year

$139,000

Net Cash Flow

$5,000

Cash at the end of of the year

$144,000

Cash as per Balance sheet at the end of 2017

$144,000

		INCOME STATEMENT
		The Sales revenue	$250,000
		The Cost of goods sold	$130,000
		The Gross Profit	$120,000
		The Doubtful debt expense	$25,000
		The interest expense	$20,000
		The Salaries	$30,000
		The Depreciation	$10,000
		The Net Profit	$35,000
		CASH FLOWS FROM OPERATING ACTIVITIES
		Net Profit	$35,000
		Add: Non cash expense of Depreciation	$10,000
		Cash flows including depreciation	$45,000
		Decrease/(Increase) in current assets:
		Inventory	($20,000)	(160-180)
		Accounts Receivable	($20,000)	(250-270)
		Increase/(Decrease) in current liabilities
		Accounts payable	$10,000	(200-190)
		Accrued salaries	$4,000	(22-18)
		Allowance for doubtful debt	($5,000)	(30-35)
		Net Cash flow from operating activities	$14,000
		CASH FLOWS FROM INVESTING ACTIVITIES
		Plant	($30,000)
		Total cash flow from Investing activities	($30,000)
		CASH FLOWS FROM FINANCING ACTIVITIES
		Bank Overdraft	$1,000	(20-19)
		Long term loan	$20,000	(90-70)
		Total cash flow from financing activities	$21,000
		Net Cash Flow	$5,000	(14000-30000+21000)
		Cash at the beginning of the year	$139,000
		Net Cash Flow	$5,000
		Cash at the end of of the year	$144,000
		Cash as per Balance sheet at the end of 2017	$144,000