BBFA1023 FINANCIAL ACCOUNTING

Tutorial 11 Statement of Cash Flows : IAS7 (Continued)

Question 1

The directors of Greenland Bhd. employ a book-keeper who prepares draft

accounts for them using accounting software. They are pleased that they
have made a profit for the year ended 30 June year 2, but do not
understand why the cash balances have decreased. They have asked you,
as an independent accountant, to prepare a statement of cash flows.
The draft financial statements for Greenland Bhd. for internal use are set
out below:
Statement of comprehensive income for the year ended 30 June year 2
RM000
Revenue
1,702
Cost of sales
(870)
Gross profit
832
Operating expenses
(435)
Depreciation
(250)
Loss on sale of property, plant and equipment
(5)
Interest income
20
Interest expense
(15)
Profit before tax
147
Tax expense
(32)
Profit for the year
115

2015-TL

Statement of financial position as at 30 June

Year 2
RM000

Year 1
RM000

Non-current assets
Property, plant and equipment
Current assets
Inventory
Receivables
Prepaid salaries
Fixed deposits
Cash on hand and in bank
Current liabilities
Payables
Interest payable
Bank overdraft
Dividend payable
Tax liability
Net current assets

Equity & liabilities

Share capital
Share premium
Retained earnings
Non-current liability
Loan

1,030

800

70
150
25
30
20
295

65
197
18
35
30
345

90
5
10
65
20
190
105
1,135

180
10
60
5
255
90
890

700
50
85
835

600
40
640

300
1,135

250
890

BBFA1023 FINANCIAL ACCOUNTING

Additional information:
1. Greenland Bhd. purchased property, plant and equipment for
RM550,000 during the year ended 30 June year 1.
2. Included in the operating expenses are salaries expense of
RM200,000.
Required:
Prepare for Greenland Bhd.:
(a) Statement of cash flows for the year ended 30 June year 2 in
accordance with IAS 7 Statement of Cash Flows using the direct
method;
(b) Disclosure notes to the statement of cash flows in respect of the on
cash and cash equivalents;
(c) Reconciliation of net income to cash flows from operating activities;

2015-TL

BBFA1023 FINANCIAL ACCOUNTING

2015-TL

Question 2

Retained earnings

The following are the financial statements extracted from the books of
MWE Sdn. Bhd.:

Non-current liabilities
Bank loan

Statement of profit and loss for the year ended 30 June 2015
RM
Revenue
344,000
Cost of sales
(151,000)
Gross profit
193,000
Distribution cost
(31,100)
Administrative expenses
(58,900)
Interest expenses
(49,500)
Profit before tax
53,500
Taxation
(13,000)
Profit for the year
40,500
Statement of financial position as at 30 June
2015
RM
RM
Assets
Non-current assets
Property, plant and
360,000
equipment
Current assets
Inventories
Trade receivables

26,500
21,000

Current liabilities
Trade payables
Bank overdraft
Tax payable
Dividend payable
Total equity and liabilities

RM
340,000

24,500
18,000

68,110
193,110

51,600

79,600

53,000
28,450
38,900
11,250

65,000
7,900
38,000
17,700
131,600
451,810

128,600
401,310

Additional information:

2014
RM

108,610
268,610

1. The following information relates to the property, plant and equipment

of MWE Sdn. Bhd.:
30 June
30 June
2015
2014
RM
RM
Cost
700,000
595,000
Accumulated depreciation
(340,000)
(255,000)
Net book value
360,000
340,000
2. Fixtures and fittings with an original cost of RM85,000 and net book
value of RM45,000, were sold for RM40,000 during the year ended 30
June 2015.

BBFA1023 FINANCIAL ACCOUNTING

Fixed deposits
Cash at bank

Equities and liabilities

Equity
Ordinary shares of RM1.00 each
Share premium
Question 1 (Answers)
b) Cash and Cash Equivalents:

Balance b/d
Sales (Revenue)

5,500
13,310
61,310
401,310

150,000
10,000

125,000
-

(a)

Prepare the statement of cash flows of MWE Sdn. Bhd. for the year
ended 30 June 2015 in accordance with IAS 7 Statement of Cash
Flows, using the indirect method.

(b) Prepare the notes to the statement of cash flows in respect of the cash
and cash equivalents.
Dividend Payable
Balance c/d

Year 2
RM
30
20
(10)
40
Trade Receivables (Note 1)
197 Bank
1,702 Balance c/d
1,899

Bank
Balance c/d

Trade Payables (Note 2)

965 Balance b/d
90 Purchases
1,055

Bank
Balance c/d

Interest payable (Note 3)

20 Balance b/d
5 Interest Expenses
25

Bank
Balance c/d

2015-TL

Required:

91,810
451,810

Total assets

Fixed Deposits
Cash at Bank
Bank Overdraft

18,500
25,810

Tax payable (Note 4)

17 Balance b/d
20 Tax expenses
37
Retained Earnings (Note 5)

Year 1
RM
35
30

Balance b/d
Bank

65

1,749
150
1,899

PPE (NBV)

70
85
155

Balance b/d
Tax expenses

40
115
155

PPE (NVB) (Note 6)

800 Disposal
Depreciation
550 Balance c/d
1,350
Disposal (Note 7)
70 Bank
Loss
70

20
250
1,030
1,350
65
5
70

a) Statement of Cash Flows for the Year ended 30 June (Direct Method)
180
875
1,055

10
15
25

5
32
37

Cash Flows from Operating Activities

Cash received from customers (Note 1)
Cash paid to suppliers (Note 2)
Cash paid to employees
Cash paid for operating expenses
(435-200)
Cash generated from operations
Tax paid (Note 4)
Finance Cost (Note 3)
Net Cash Generated from Operations
Cash flows from Investing Activities
Additions to PPE (Note 6)
Proceeds from disposal of PPE (Note 7)
Interest Received
Net Cash used in Investing Activities

RM000

RM000
1,749
(965)
(207)
(235)
342
(17)
(20)
305
(550)
65
20
(465)

BBFA1023 FINANCIAL ACCOUNTING

Cash flows from Financing Activities

Issuance of Shares (700 600) + 50
Dividend Paid (Note 5)
Issuance of Loan notes (300-250)
Net Cash used in Financial Activities

150
(65)
50
135

Net Decrease in Cash and Cash Equivalents

Cash and Cash equivalents at beginning of year
Cash and Cash equivalents at end of year

(25)
65
40

c) Reconciliation of net income to cash flows from operating activities

Cash Flows from Operating Activities
Profit before tax
Adjustments for:
Depreciation
Gain on Disposal of PPE
Interest Income
Finance Cost
Operating Profit before W.C changes
Increase in Inventories (70-65)
Decrease in trade receivables (150-197)
Increase in prepayments (25-18)
Decrease in trade payables (90-180)
Cash generated from operations

RM000
250
5
(20)
15
(5)
47
(7)
(90)

RM000
147

250
397

(55)
342

2015-TL

BBFA1023 FINANCIAL ACCOUNTING

2015-TL

Question 2
b) Cash and Cash Equivalents
Fixed Deposits
Cash at Bank
Bank Overdraft

Year 2
RM
18,500
25,810
(28,450)
15,860

Bank
Balance c/d

Tax Payable (Note 1)

12,100 Balance b/d
38,900 Tax expense
51,000

Balance b/d
Bank

PPE (Cost) (Note 2)

595,000 Disposal
190,000 Balance c/d
785,000

Disposal
Balance c/d

PPE (Cost)

Bank
Balance c/d

Year 1
RM
5,500
13,310
(7,900)
10,910

38,000
13,000
51,000

85,000
700,000
785,000

Accumulated Depreciation (Note 3)

40,000 Balance b/d
340,000 Depreciation
380,000

255,000
125,000
380,000

Disposal- PPE (Note 4)

85,000 Bank
Acc. Dep
Loss
85,000

40,000
40,000
5,000
85,000

Dividend Payable (Note 5)

6,450 Balance b/d
11,250
17,700

17,700
17,700

a) Statement of Cash Flows for the Year ended 30 June (Indirect Method)
Cash Flows from Operating Activities
Profit before tax
Adjustments for:
Depreciation
Loss on Disposal of PPE
Finance Cost
Operating Profit before W.C changes
Increase in Inventories (26,500-24,500)
Increase in trade receivables (21,000-18,000)
Decrease in trade payables (53,000-65,000)
Cash generated from operations
Tax paid (Note 1)
Finance Cost
Net Cash Generated from Operations
Cash flows from Investing Activities
Additions to PPE (Note 2)
Proceeds from disposal of PPE (Note 4)
Net Cash used in Investing Activities

RM
125,000
5,000
49,500
(2,000)
(3,000)
(12,000)

RM
53,500

179,500
233,000
(17,000)
216,000
(12,100)
(49,500)
154,400
(190,000
)
40,000
(150,000
)

Cash flows from Financing Activities

Issuance of Shares (150,000-125,000)+10,000
Dividend Paid (Note 5)
Repayment of Loan Notes (51,600-79,600)
Net Cash used in Financial Activites

35,000
(6,450)
(28,000)
550

Net Decrease in Cash and Cash Equivalents

Cash and Cash equivalents at beginning of year
Cash and Cash equivalents at end of year

4,950
10,910
15,860