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Financial Accounting I – Statements of cash flow
BBA | BBA-BI | BBA-TT | BCIS 1st
PU 2011 Spring Q. No. 4
The following financial statements are extracted from the books of Carter Company Ltd. For the year ended 31st December, 2010.
Carter Company Ltd.
Income statement for the year ended
December 31, 2011.
| Particulars | Rs. | Rs. |
| Sales revenue Less: Cost of goods sold Gross profit Selling general and administrative expenses: Salaries and wages Depreciation Insurance Operating profit Other incomes and Gains/losses: Interest revenue Gain on sale of machine Loss of retirement of bonds Net income before interest Interest expenses Net income before tax Income taxes Net income | 84,000 56,000 16,800 21,000 7,000 (4,200) | 9,38,000 546,000 392,000 156,800 1,35,200 23,800 259,000 71,400 187,600 46,900 140,700 |
Carter Company Ltd.
Balance sheet
As on December 31, 2010
| Particulars | 2010 (Rs.) | 2009 (Rs.) |
| Cash and cash equivalents Account receivable Inventory Prepaid insurance Total current assets Investment Land and building Property, plant, and equipment Accumulated depreciation Total long-term assets | 49,000 88,200 117,600 16,800 271,600 168,000 210,000 448,000 (140,000) 686,000 | 64,400 79,800 128,800 25,200 298,200 126,000 140,000 392,000 (105,000) 553,000 |
| Total assets | 957,600 | 851,200 |
| Accounts payable Salaries and wages payable Income taxes payable Total current liabilities Notes payable Bonds payable Total long-term liabilities Capital stock Retained earnings Total shareholder’s equity Total liabilities and stockholder’s equity | 53,200 9,800 11,200 74,200 119,000 280,000 399,000 140,000 344,400 484,400 957,600 | 43,400 12,600 7,000 63,000 49,000 364,000 413,000 105,000 270,200 375,200 851,200 |
Additional information:
i. Additional investment was made to the extent of Rs. 42,000.
ii. A piece of land was purchased by issuing a note payable of Rs. 70,000.
iii. A machine with an original cost of Rs. 49,000 having an accumulated depreciation of Rs. 21,000 was sold of Rs. 35,000.
iv. Machinery worth Rs. 105,000 was purchased during the year by paying cash.
v. Bonds were retired at a premium by paying Rs. 88,200 in cash.
vi. Dividends of Rs. 66,500 were paid during the year.
vii. All capital stocks were issued for cash.
Required: A statement of cash flows using the direct method in
Solution:
Carter Company Ltd.
Statements of cash flows (direct method)
For the year ended Dec. 31, 2010
| Particulars | Amount Rs. |
| 1. Cash flow from operating activities a. Cash sales and collection from customers Sales revenue Increase in accounts receivable | 9,38,000 (8,400) |
| b. Cash paid to suppliers Cost of goods sold Decrease in inventory Increase in account payable | (5,46,000) 11,200 9,800 |
| c. Cash paid to employees and operating expenses Insurance expenses Salaries and wages Decrease in prepaid insurance Decrease in salaries and wages payable | (16,800) (84,000) 8,400 (2,800) |
| d. Payment of interest Interest expenses | (71,400) |
| e. Payment of tax Income taxes Increase in income taxes payable | (46,900) 4,200 |
| f. Interest and dividend income Interest revenue Net cash flow from operating activities (a+b+c+d+e+f) | 21,000 2,16,300 |
| 2. Cash flow from investing activities Purchase of investment Purchase of machine Sale of machine Net cash flow from investing activities | (42,000) (1,05,000) 35,000 (1,12,000) |
| 3. Cash flow from financing activities Redemption of bond with premium Dividend paid Net cash flow from financing activities | (88,200) 35,000 (66,500) (1,19,700) |
| Net changes in cash or cash equivalent (1+2+3) Add: Opening cash balance | (15,400) 64,400 |
| Ending cash balance | Rs. 49,000 |