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I’ve done this question but I have £100 which does not balance, and was wondering whether you could take a look and what am I missing? 🙁
Below are the consolidated Balance Sheets of GK plc as at 31 December 2009.
NON-CURRENT ASSETS
Property, Plant and Equipment: £8,823 (2009) £5,940 (2008)CURRENT ASSETS
Inventory: £933 (2009) £454 (2008)
Trade debtors: £857 (2009) £577 (2008)
Cash and cash equivalents: £221 (2009) £337 (2008)TOTAL ASSETS: £10, 834 (2009) £7,308 (2008)
EQUITY AND LIABILITIES
CURRENT LIABILITIES
Trade creditors: £546 (2009) £634 (2008)
Income taxes payable: £108 (2009) £444 (2008)NON-CURRENT LIABILITIES: £1,816 (2009) £1,616 (2008)
TOTAL LIABILITIES: £2,470 (2009) £2,694 (2008)
SHAREHOLDERS’ EQUITY
Share capital (shares £1 each): £3,230 (2009); £3,000 (2008)
Retained Profits: £4,934 (2009); £1,614 (2008)
Revaluation Reserve: £200 (2009); £0 (2008)TOTAL EQUITY and LIABILITIES: £10,834 (2009); £7,308 (2008)
The Consolidated Income Statement for the year ended 31 December 2009 is presented below:
Sales: £15,400
Cost of Sales: £9,200
Selling and Admin: £1,990
Depreciation expense: £400
Rent expenses: £50
Interest expense: £40
TOTAL EXPENSES: £11,680
Profit before tax: £3,720
Less: Income tax expense: £400
NET PROFIT: £3,320ADDITIONAL INFORMATION:
(i) Property, plant and equipment include assets which were revalued upwards by £200,000 during 2009.
(ii) Equipment of £800,000 gross book value and £300,000 accumulated depreciation, was sold for £600,000. The company includes gains and losses on sales of non-current assets under cost of sales.
(iii) The company received £300,000 from the issue of bonds. Part of this amount (£100,000) was used in the reduction of its liability relating to finance leases.
(iv) On 31 March 2009, GK plc acquired AG plc for £230,000. The fair values of assets and liabilities of the acquired company at the time of acquisition were as follows:
Property, plant and equipment: £100
Inventory: £70
Trade debtors: £40
Cash: £80
Trade creditors: £60To complete this transaction, GK plc issued 230,000 shares and received £230,000.
PREPARE THE CASH FLOW STATEMENT using the INDIRECT METHOD
The way I solved it:
CASH FLOWS from OPERATING ACTIVITIES:
Profit before tax: £3,720
Adjustments for
– Depreciation: +£400
– Interest expense: +£40
– Gain on sale: – £100Changes in working capital:
– Inventory: – £479 + £70 = – £409
– Trade debtors: -£280 + £40 = – £240
– Trade creditors: -£88 – £60= -£148Interest paid: – £40
Tax paid: – £736NET CASH FLOWS from OPERATING ACTIVITIES: £2,487
CASH FLOWS from INVESTING ACTIVITIES:
Payment for the acquisition of AG net of cash acquired: – £150
Proceeds from sale of investment: + £600
Purchase of PPE: £- 3,483NET CASH FLOWS from INVESTING ACTIVITIES: – £3,033
CASH FLOWS from FINANCING ACTIVITIES:
Proceeds from the issue of bonds: £300
Payment of principal of finance leases: -£100
Proceeds from issue of shares: £230
Repayment of loans: -£100 (it must be since the difference in non-current liabilities is £200, from which £100 is repayment of the principal of finance leases)NET CASH FLOWS from FINANCING ACTIVITIES: +£330
NET CASH CHANGE: – £216 (and it should be -£116 instead)
Cash at the beginning of the year: £337
Cash at the end of the year: £221Think about this line
“Repayment of loans: -£100 (it must be since the difference in non-current liabilities is £200, from which £100 is repayment of the principal of finance leases)” and, in addition, tell me what your double entry was for the receipt of cash from the bond issue
Now, also tell me – why are you looking at P2 consolidated cash flows in the F7 forum?
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