FAR210: Statement of Cash Flow

Tutorial Questions

QUESTION 1

The following are Loolian Berhad’s, Statement of Profit or Loss and other Comprehensive
Income for the year ended 31 December 2019 and the Statement of Financial Position for
the last two years.

LOOLIAN BERHAD
Statement of Profit or Loss and other Comprehensive Income for the year ended 31
December 2019

RM RM
Turnover 1,000,000
Cost of sales (480,000)
520,000
Income from quoted investment 15,000
Gain on disposal of plant and equipment 20,000
555,000
Wages and salaries 125,000
Interest expense 30,000
Other expenses (including depreciation of RM10,000) 75,000 (230,000)
Profit before tax 325,000
Taxation (100,000)
Net profit for the year 225,000

The retained earnings movement is given below:

Opening Balance as at 1/1/2019 250,000

Dividend :
Interim (10,000)
Final (75,000)
Net profit for the year 225,000
Closing balance as at 31/12/2019 390,000

LOOLIAN BERHAD
Statement of Financial Position as at 31 December

2019 2018
RM RM
Non-Current Assets
Land & Building 1,100,000 800,000
Plant & Machinery 150,000 200,000
Accumulated Depreciation Plant & Machinery (25,000) (30,000)
Motor Vehicles 100,000 100,000
Accumulated Depreciation Motor Vehicles (15,000) (10,000)
Long term investment 150,000 200,000
1,460,000 1,260,000

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Current Assets
Inventories 35,000 25,000
Account Receivables 120,000 85,000
Bank 95,000 75,000
Short term investment 170,000 -
420,000 185,000

TOTAL ASSETS 1,880,000 1,445,000

Ordinary shares of RM1.00 each 950,000 600,000

Retained Earnings 390,000 250,000

Non-current liabilities

10% Debentures 250,000 300,000

Long term loan 50,000 100,000

Current liabilities
Accrued wages and salaries 2,500 5,000
Account Payables 62,500 75,000
Tax Payable 100,000 50,000
Dividend Payable 75,000 65,000
240,000 195,000

TOTAL EQUITIES AND LIABILITIES 1,880,000 1,445,000

Additional Information:

1) Part of the 10% Debentures was redeemed at par.

2) The increase in the share capital was due to the issue of 350,000 ordinary shares for
cash.

3) Depreciation charge was RM5,000 each for plant & machinery and motor vehicle in
the Statement of Profit or Loss.

4) There was no purchase for plant & machinery during the year. Decrease in Plant and
Machinery is due to a disposal of one machinery at a cost of RM50,000 with
accumulated depreciation of RM10,000.

5) The taxation charge for the year was RM100,000

6) Short term investment is considered part of the cash and cash equivalents of the
company.

Required:

a. Prepare the Statement of Cash Flow for Loolian Berhad for the year ended 31
December 2019 by using the direct method and a statement showing the
reconciliation of operating profit to cash flow from operations.

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b. Discuss two benefits of Statement of Cash Flows to investors.

Question 2
The Statement of Profit or Loss for the year ended 31 December 2019 and the Statements
of Financial Position of LAGA Sdn Bhd for the last two years are given below:

LAGA Sdn Bhd

Statement of Profit or Loss for the year ended 31 December 2019

RM

Turnover 750,000

Cost of sales (255,000)

Gross profit 495,000

Administrative expenses (126,000)

Selling and distribution expenses (36,000)

Other operating expenses (24,000)

Operating profit 309,000

Interest expenses (7,800)

Gain on disposal of motor vehicle 10,000

Dividend income 17,000

Profit before tax 328,200

Taxation (30,000)

Net profit 298,200

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LAGA Sdn Bhd

Statement of Financial Position as at 31 December

2019 2018

RM RM

Non-current assets

Property, plant and equipment 245,940 225,000

Long term Investments 150,000 240,000

395,940 465,000

Current assets

Short term investments 100,000 50,000

Inventories 186,000 202,800

Accounts receivable 96,000 72,000

Cash and Bank balances 107,000 116,200

489,000 441,000

Total assets 884,940 906,000

Financed by:

Ordinary share capital 150,000 75,000

Retained earnings 517,440 270,000

667,440 345,000

Non-current liabilities

Loan from BIM Bank 102,000 448,500

Current liabilities

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Accounts payable 75,000 81,000

Taxation payable 30,000 23,400

Accrued distribution expense 4,500 8,100

Accrued salary and wages 6,000 -

109,500 112,500

Total equity and liabilities 884,940 906,000

Additional information:

1. During the year:

i. A motor vehicle costing RM80,000 with accumulated depreciation of

RM59,060 was disposed off.
ii. Depreciation expense of RM24,060 was recorded as part of administrative
expenses..
iii. The company purchased a machinery.

2. Long-term investment with carrying value of RM90,000 was disposed off in the
current year a loss of RM24,000 recorded as other operating expenses.

3. The movement in the retained earnings is as follows:

RM

Opening balance as at 1/1/2019 270,000

Net Profit 298,200

Dividend paid (50,760)

Balance as at 31/12/2019 517,440

4. Included in the administrative expenses is salary and wages expenses amounting to

RM80,000.

Required:

a. Prepare the Statement of Cash Flow for LAGA Sdn Bhd for the year ended 31
December 2019 by using the direct method. (Show full workings)

b. Prepare a statement showing the reconciliation of operating profit to cash flow

from operations. (Show all relevant workings)

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c. Briefly explain five benefits of Statement of Cash Flows to the shareholders.

Question 3

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