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19.4 Emma
Set out below are the financial statements of Emma, a limited liability company.
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 20X2
$’000
Sales revenue 2,553
Cost of sales 1,814
Gross profit 739
Distribution costs 125
Administrative expenses 204
Finance costs 60***
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Profit before tax 350
Income tax expense 240
—————————————————
Profit for the year 110### solve, Profit before tax = 410 (in this question they add back the finance cost ( interest payable) I understand this we need to add it back cause the cash is not out from the business yet.
### but in this question they don’t add back the finance cost
19.5 Sioux
The following information is available for Sioux, a limited liability company:
SUMMARISED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 20X4
$’000
Profit from operations 2,650
Finance cost (loan note interest) (300)
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Profit before tax 2,350
Income tax expense (700)
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Net profit for the year 1,650### In the solve thy don’t add back the finance cost . just put the ***net profit before tex =2350
*** Sir, I have seen your lecture. but I became so confused after seeing these 2 questions
please help sir.19.6 Snowdrop
The following information has been extracted from the draft financial statements of Snowdrop, a limited liability
company.
The statement of profit or loss for the year ended 31 May 20X5 shows the following.
$’000
Operating profit 1,042
Interest payable (10)
Profit before taxation 1,032
Taxation (180)
Profit for financial year 852### also in this question, they don’t add back the interest payable.
kit shows, Net profit before tax =1032
what should I do sir? please helpBut you have not said what any of the questions are requiring you to do!
the question is,
Cash flows from operating activities
Net profit before tax / Net profit after tax (delete as applicable) =?
same for all the 3 questions.These are BPP questions and the answers are a little inconsistent.
Strictly we should start with the profit before tax and before interest, and then subtract the tax and interest later in the statement. This is the case in 19.4.
In the other two questions there is no space in the question to enter the interest paid, and so they have started with the profit before tax but after interest.
It does obviously end up giving the same net result, but strictly the second two questions should have had space to enter the interest paid, in which case we would have started with the profit before tax and before interest.
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