C15.1 [S]

The directors of Fruit Sales plc produced the following income statement (profit and loss account) for Year 2 and balance sheet at the end of Year 2.

Further information 1 The dividend paid during Year 2 was £31m. The retained earnings increased by £82m profit of the period and decreased by the amount of the dividend £31m.
2 During Year 2 the company acquired vehicles costing £90m.
3 During Year 2 the company sold vehicles that had an original cost of £25m and accumulated depreciation of £12m. The proceeds of sale were £20m.
4 Cost of sales consists entirely of purchases of fruit on credit from suppliers. Wages are included in administrative and selling expenses and are paid when incurred.
Required 1 Prepare a statement of cash flows using

(a) the direct method and

(b) the indirect method of calculating operating cash flow.
2 Write a comment on the cash flow of the period.

Transcribed Image Text:

Revenue Cost of sales Income statement for year 2 m 320 (143) Gross profit Investment income - interest received Gain on disposal of equipment Depreciation Administrative and selling expenses Operating profit before interest Interest expense Profit after deducting interest Taxation Profit after tax 177 5 7 (39) (13) 137 (20) 117 (35) 82