Question 19                                                                         (35 marks)The management of Lizard Ltd...
Lizard Ltd                                     Income statement                             for the year ended 30 June 201...
Workings:
Lizard Ltd                                                                                         Statement of cash flows...
SOLUTIONSQuestion 19                                                                          (35 marks)                  ...
Item 1 (3 marks)Calculating cash receipts                                 MarksOpening balance                            ...
Item 3 (2 marks) Proceeds from Disposal                                  Marks Book value                                 ...
Total 2
Cash flows question 19 (2)
Cash flows question 19 (2)
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Cash flows question 19 (2)

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Cash flows question 19 (2)

  1. 1. Question 19 (35 marks)The management of Lizard Ltd. require you to prepare a statement of cash flows for theirbusiness for the year ended 30 June 2010. Lizard Limited Balance Sheet 30th June 30th June 2010 2009 $ $Current AssetsCash holdings 21,000 45,000Inventories 173,000 188,000Receivables 120,000 119,000Short-term deposits 40,000 65,000Total Current Assets 354,000 417,000Non-Current AssetsInvestments 650,000 750,000Property, plant and equipment 2,003,000 1 550,000Total Non-Current Assets 2,653,000 2,300,000Total Assets 3,007,000 2,717,000Current LiabilitiesAccounts payable 104,000 82,000Income tax payable 192,000 136,000Total Current Liabilities 296,000 218,000Non-Current LiabilitiesBorrowings 300,000 180,000Total Non-Current Liabilities 300,000 180,000Total Liabilities 596,000 398,000Net Assets 2,411,000 2,319,000EquityShare capital 2,000,000 1 900,000General reserve 300,000 250,000Retained earnings 111,000 169,000 2,411,000 2,319,000Lizard LimitedExtract to the Notes to the financial statements 2010 2009Property, plant and equipmentLand, at cost 900,000 900,000Plant and equipment, at cost 1,290,000 795,000Accumulated depreciation of plant and equipment 187,000 145,000 1,103,000 650,000Property, plant and equipment, book value 2,003,000 1,550,000An item of plant originally purchased for $65,000 and with a book value of $12,000 was soldduring the year for cash.
  2. 2. Lizard Ltd Income statement for the year ended 30 June 2010 $ Sales 2,850,000 Less cost of sales 1,340,000 Gross profit 1,510,000 Add interest revenue 2,400 Gain on sale of plant and equipment 8,000 Dividends received 24,000 1,544,400 Less interest expense 18,750 Other expenses 670,300 Profit before tax 855,350 Less income tax expense 192,000 Profit for the year 663,350Other information: Income tax provided on 30 June 2009 was paid during the year. The change in borrowings during the year was due to an issue of debentures. It is company policy that the purchase and sale of all non-current assets be for cash.Prepare a Statement of cash flows for Lizard Ltd. for the year ended 30 June 2010. (35 marks)Workings:
  3. 3. Workings:
  4. 4. Lizard Ltd Statement of cash flows for the year ended 30 June 2010____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________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  5. 5. SOLUTIONSQuestion 19 (35 marks) Lizard Ltd Statement of cash flows for the year ended 30 June 2010 $ $ MarksCash flows from operating activitiesReceipts from customers 2,849,000 3Payments to suppliers and employees (1,878,300) 11Income tax paid (136,000) 1Interest paid (18,750) 1Net cash from operating activities 815,950Cash flows from investing activitiesInterest received 2,400 1Dividends received 24,000 1Sale of investments 100,000 1Proceeds from disposal 20,000 2Payments for property,plant and equipment (560,000) 3 (413,600)Cash flows from financing activitiesIssue of debentures 120,000 1Additional share capital 100,000 1Dividends paid (671,350) 4 (451,350)Net cash decrease for period (49,000) 1Cash and cash equivalents at start 110,000 2Cash and cash equivalents at end $61,000 2 Total 35Marking:Award the marks shown in the final column for numerical accuracy. Amounts which requirecalculation are worth more than one mark.The exact marks breakdown can be viewed in the items on the next page. If numericalcalculations are correct but the item is misclassified, then deduct 1 mark, up to a maximumof 2 marks.
  6. 6. Item 1 (3 marks)Calculating cash receipts MarksOpening balance 119,000Add credit sales 2,850,000 1Less accounts received ???Closing balance 2,969,000Therefore cash received from customers is $2,849,000 1Opening and closing balance 1 Total 3Item 2 (11 marks)Payments to suppliers and MarksemployeesCalculating PurchasesClosing inventory 173,000Add cost of sales 1,340,000 1Less opening inventory 188,000Purchases 1,325,000 1Opening and closing inventory 1 Total 3Calculate Cash Payments MarksOpening accounts payable balance 82,000Add purchases 1,325,000 1Less closing accounts payable balance 104,000 1,303,000 1Opening and closing balance 1 Total 3 Schedule of Payments to Suppliers Marks and Employees Payments to suppliers 1,303,000 1 Other expenses 670,300 1 Less depreciation 95,000* 3 1,878,300 Total 5* (65,000 – 12,000) + (187,000 – 145,000) = 53,000 + 42,000 =95,000 (1) (1) (1)
  7. 7. Item 3 (2 marks) Proceeds from Disposal Marks Book value 12,000 1 Add gain on sale 8,000 1 Proceeds from disposal 20,000 Total 2Item 4 (3 marks) Plant and equipment Marks Opening balance 795,000 Less sale of equipment 65,000 1 Acquisition of new plant and ??? equipment Closing balance 1,290,000 Therefore new equipment acquired = $560,000 1 Opening and closing balance 1 Total 3Item 5 (4 marks) Retained earnings Marks Opening balance 169,000 Add profit 663,350 1 Less general reserve 50,000 1 Less dividends ??? Closing balance 111,000 Dividends paid must therefore be $671,350 1 Opening and closing balance 1 Total 4Item 6 (2 marks) Cash and cash equivalents at start Marks Cash 45,000 1 Add short-term deposits 65,000 1 110,000 Total 2Item 7 (2 marks) Cash and cash equivalents at end Marks Cash 21,000 1 Add short-term deposits 40,000 1 61,000
  8. 8. Total 2

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