Prepare a cash flow statement for Lee Ltd for the year ended 31 December 20X4 as required under FRS 1 using the direct method, together with note 1 to the statement. The profit and loss account, balance sheet and cash account for Lee Ltd for the year 20X4 are given below. (Do not attempt to provide the reconciliation of net cash flow to net debt.)

Data from FRS 1

Cash flows relating to items classed as exceptional or extraordinary in the profit and loss account should be shown under the appropriate standard headings, according to their nature. They should be identified in the cash flow statement or a note to it and the relationship between the cash flows and the originating exceptional or extraordinary item should be explained. Where the cash flows themselves are exceptional because of their size or incidence but the underlying event that gave rise to them is not, sufficient disclosure should be given to explain their cause and effect.

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Sales Less Cost of goods sold Less Expenses Wages Other costs Profit and Loss Account for the year ending 31 December 20X4 Depreciation Interest Profit for the year Dividend Retained profit 4 2,000 600 500 100 £ 6,500 (3,000) 3,500 (3,200) 300 (50) 250