The directors of Transport 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.

Required 

1. Prepare a cash flow statement 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:

Income statement for year 2 Revenue Cost of sales 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 m 320 (143) 177 5 7 (39) (13) 137 (20) 117 (35) 82