Photo AI

Cash Flow Statement The following information has been extracted from the books of Britton Ltd: Profit and loss (extract) for year ended 31/12/2019 Operating profit 124,000 Interest paid (11,000) Taxation (14,000) Dividends paid (12,000) Retained profit 48,000 Profit and loss balance 01/01/2019 48,000 Profit and loss balance 31/12/2019 Balance Sheets as at 31/12/2019 31/12/2018 Fixed Assets Land and buildings 690,000 620,000 Less depreciation provision (125,000) (84,000) Current Assets Stock 63,000 75,000 Debtors 24,000 27,000 Bank 15,000 26,000 Total 102,000 128,000 Less Creditors: amounts falling due within 1 year Creditors (16,000) (24,000) Taxation (14,000) (12,000) Net Current Assets 72,000 94,000 Total Net Assets 637,000 460,000 Financed by Creditors: amounts falling due after 1 year 7% Debentures 160,000 120,000 Capital and Reserves Ordinary share capital issued 310,000 270,000 Share premium 32,000 22,000 Profit and loss account 135,000 48,000 Total 637,000 460,000 Required: (a) Reconcile the operating profit to net cash inflow/outflow from operating activities - Leaving Cert Accounting - Question 6 - 2020

Question icon

Question 6

Cash-Flow-Statement-The-following-information-has-been-extracted-from-the-books-of-Britton-Ltd:--Profit-and-loss-(extract)-for-year-ended-31/12/2019-Operating-profit-124,000-Interest-paid-(11,000)-Taxation-(14,000)--Dividends-paid-(12,000)-Retained-profit-48,000-Profit-and-loss-balance-01/01/2019-48,000-Profit-and-loss-balance-31/12/2019---Balance-Sheets-as-at-31/12/2019--31/12/2018--Fixed-Assets-Land-and-buildings-690,000-620,000-Less-depreciation-provision-(125,000)-(84,000)--Current-Assets-Stock-63,000-75,000-Debtors-24,000-27,000-Bank-15,000-26,000--Total-102,000-128,000--Less-Creditors:-amounts-falling-due-within-1-year-Creditors-(16,000)-(24,000)-Taxation-(14,000)-(12,000)--Net-Current-Assets-72,000-94,000-Total-Net-Assets-637,000-460,000--Financed-by-Creditors:-amounts-falling-due-after-1-year-7%-Debentures-160,000-120,000--Capital-and-Reserves-Ordinary-share-capital-issued-310,000-270,000-Share-premium-32,000-22,000-Profit-and-loss-account-135,000-48,000--Total-637,000-460,000--Required:-(a)-Reconcile-the-operating-profit-to-net-cash-inflow/outflow-from-operating-activities-Leaving Cert Accounting-Question 6-2020.png

Cash Flow Statement The following information has been extracted from the books of Britton Ltd: Profit and loss (extract) for year ended 31/12/2019 Operating profit... show full transcript

Worked Solution & Example Answer:Cash Flow Statement The following information has been extracted from the books of Britton Ltd: Profit and loss (extract) for year ended 31/12/2019 Operating profit 124,000 Interest paid (11,000) Taxation (14,000) Dividends paid (12,000) Retained profit 48,000 Profit and loss balance 01/01/2019 48,000 Profit and loss balance 31/12/2019 Balance Sheets as at 31/12/2019 31/12/2018 Fixed Assets Land and buildings 690,000 620,000 Less depreciation provision (125,000) (84,000) Current Assets Stock 63,000 75,000 Debtors 24,000 27,000 Bank 15,000 26,000 Total 102,000 128,000 Less Creditors: amounts falling due within 1 year Creditors (16,000) (24,000) Taxation (14,000) (12,000) Net Current Assets 72,000 94,000 Total Net Assets 637,000 460,000 Financed by Creditors: amounts falling due after 1 year 7% Debentures 160,000 120,000 Capital and Reserves Ordinary share capital issued 310,000 270,000 Share premium 32,000 22,000 Profit and loss account 135,000 48,000 Total 637,000 460,000 Required: (a) Reconcile the operating profit to net cash inflow/outflow from operating activities - Leaving Cert Accounting - Question 6 - 2020

Step 1

Reconcile the operating profit to net cash inflow/outflow from operating activities.

96%

114 rated

Answer

To reconcile the operating profit to net cash inflow, we begin with the operating profit and adjust for non-cash items and changes in working capital:

  1. Start with the operating profit:

    • Operating profit = €124,000

  2. Add back non-cash items:

    • Add depreciation = €41,000

  3. Adjust for changes in working capital:

    • Decrease in stock = €12,000
    • Decrease in debtors = €3,000
    • Decrease in creditors = (€8,000)

  4. Calculate net cash inflow from operating activities:

    • Net cash inflow = Operating profit + Depreciation + Decrease in stock + Decrease in debtors - Increase in creditors
    • Net cash inflow = €124,000 + €41,000 + €12,000 + €3,000 - €8,000 = €172,000

Step 2

Prepare the cash flow statement of Britton Ltd for the year ended 31/12/2019.

99%

104 rated

Answer

Cash Flow Statement for the year ended 31/12/2019

Operating Activities

  • Net cash inflow from operating activities: €172,000

Return on Investment and Servicing of Finance

  • Interest paid: €(11,000)

Taxation

  • Tax paid: €(10,000)

Capital Expenditure and Financial Investment

  • Purchase of land/buildings: €(240,000)

Equity Dividend Paid

  • Dividends paid: €(12,000)

Financing

  • Issue of ordinary share capital: €40,000
  • Share premium: €10,000
  • Debentures: €40,000
  • Decrease in cash: €(11,000)

Net cash inflow before liquid resources and financing = €(101,000)

Step 3

Reconcile the net cash flow to movement in net debt.

96%

101 rated

Answer

To reconcile the net cash flow to movement in net debt, we consider the changes in cash and debt:

  1. Decrease in cash in the period = €(51,000)

  2. Debentures = €40,000

  3. Change in net debt:

    • Start of period net debt = €94,000
    • End of period net debt = €(145,000)

  4. Movement in net debt = End Net Debt - Start Net Debt

    • Movement in net debt = (€(145,000) - €(94,000)) = €(51,000)

Join the Leaving Cert students using SimpleStudy...

97% of Students

Report Improved Results

98% of Students

Recommend to friends

100,000+

Students Supported

1 Million+

Questions answered

;