(3) Since there is no increase in reserves 340 lakh), the entire net income after taxes of 200 lakh represents payment of dividend to equity shareholders. P.5.7 The manager of a small plastic manufacturing company has reviewed the annual financial state- ments for the current year and is unable to determine from a reading of the balance sheet the reasons for the changes in cash during the year. He asks you for assistance and presents the following balance sheets of the Hypothetical Ltd. Particulars Previous year Current year Increase March 31 March 31 (Decreases) Assets: Goodwill 31.00.000 (Nil) (1,00,000) Buildings 2.80,000 34,05,000 1.25.000 Land 75,000 70.000 (5,000) Machinery 1,00,000 1,65,000 65,000 Tools 35,000 20,000 (15,000) Trade investments 7,500 9,000 1,500 Inventories 1,09,000 1,05,000 (4,000) Sundry debtors 46.000 90,000 44,000 Bills receivable 13,500 10,500 (3,000) Cash in hand 4,500 1,000 (3,500) Unexpired insurance 700 600 (100) Unamortised discount on debentures 1.250 1,050 (200) 7.72,450 8.77.150 1.04.700 Liabilities: Equity share capital 2,00,000 3,50,000 1,50,000 Debentures 50,000 75,000 25,000 Sundry creditors 26,000 29,000 3,000 Bank overdraft 4,000 4,000 Bills payable 5,000 4,500 (500) Bank loans (short-term) 3,400 750 (2,650) Accrued taxes 1,500 2,500 1.000 Accrued interest 3,000 5,000 2,000 Allowance for doubtful accounts 1,150 2.250 1.100 Accumulated depreciation 90,500 1,35,600 45,100 Retained earnings 3.91.900 2,68,550 (1,23,350) 7,72,450 8.77.150 1,04,700 Additional Information: (i) There were no purchases or sales of tools. (ii) Equity shares were issued at a discount of 10 per cent. (iii) Old machinery that cost 2,250 was scrapped and written off the books. Accumulated depreciation on such equipment was 1,650. (iv) The income statement for the current year is: Sales (net) 26,25,000 Less:Expenses: Operating charges: Materials and supplies 1,25,000 Direct labour 1,05,000 Manufacturing overhead 90,750 Depreciation 61,750 Selling expenses 1,22,500 General expenses 1,15,000 Interest expenses 3,750 (Contd.) y9 (Contd.) Unusual items: Writing off of goodwill Writing off of land Loss on machinery Discount on issue of equity shares 15,000 Net loss You are required to prepare cash flow statement based on AS-3. 1,00,000 5,000 600 7,44,350 (1,19,350)