Exercise 17.

11

Preparation of a statement of cash flows

A summarised comparative statement of financial position of Denim Ltd is presented

below, together with the statement of profit or loss and other comprehensive income for
the year ended 30 June 2019.

Additional information
 There were no disposals of investments or plant during the year.
 A dividend of $23  000 was paid during the year.
 The deferred tax liability is in relation to investments.
Required
Using the direct method of presenting cash flows from operating activities, prepare a
statement of cash flows in accordance with AASB 107/IAS 7 for the year ended 30 June
2019. (LO3 and LO5)

2018 2019 Increase

(decrease)
$ $ $
Cash 30 000 68 000 38 000
Trade receivables 46 000 70 000 24 000
Inventory 30 000 32 000 2 000
Investments 35 000 40 000 5 000
Plant 125 000 150 000 25 000
Accumulated depreciation (23 000) (35 000) 12 000
243 000 325 000
Accounts payable 39 000 43 000 4 000
Accrued interest 3 000 5 000 2 000
Current tax payable 10 000 12 000 2 000
Deferred tax liability - 1 500 1 500
Borrowings 60 000 100 000 40 000
Share capital 100 000 100 000 -
Retained earnings 31 000 60 000 29 000
Investment revaluation reserve - 3 500 3 500
243000 325000
Receipts from customers:
Sales 700 000
Increase in receivables (24 000)
Cash received 676 000

Payments to suppliers and employees

Cost of sales 483 000
Other expenses:
Distribution costs 62 000
Administration costs 74 000
Depreciation (12 000) 124 000
Increase in inventory 2 000
Increase in accounts payable (4 000)
Total payments 605 000

Interest paid
Interest expense 6 000
Increase in accrued interest (2 000)
Interest paid 4 000
Income tax paid
Income tax expense 23 000
Increase in tax payable (2 000)
Income tax paid 21 000
Investments
Revaluation gain net of tax 3 500
Increase in deferred tax liability 1 500
Purchase of investments -
Increase in investments $5 000

Explanations:
 The increase in deferred tax liability is the tax effect of the revaluation increment, as per
the additional information.
 As the increase in investments can be explained by the revaluation, and there were no
disposals of investments, we can conclude that there were no purchases of investments
during the year.
 The purchases of plant are determined as the increase in plant in the absence of any
disposals of plant during the year.

Denim Ltd
Statement of Cash Flows
for the year ended 30 June 2019

Cash flows from operating activities $

Receipts from customers 676 000
Payments to suppliers and employees (605 000)
Cash generated from operations 71 000
Interest paid (4 000)
Income tax paid (21 000)
Net cash from operating activities 46 000

Cash flows from investing activities

Purchase of plant (25 000)
Net cash used in investing activities (25 000)

Cash flows from financing activities

Proceeds from borrowings 40 000
Dividend paid (23 000)
Net cash from financing activities 17 000
Net increase in cash and cash equivalents 38 000
Cash and cash equivalents at beginning of year 30 000
Cash and cash equivalents at end of year $68 000