Additional information: 1. The company undertook a share issue during the year for cash. No other transactions related to shares during the year. 2. An interim dividend of $2,000 was declared and paid in December 2019. 3. The land was revalued upwards by $6,500 as of 31 March 2020 and revaluation increment has been credited to Land Revaluation Reserve account. No land purchases and disposals during the year. Plants with a carrying value of $24,020 were sold for cash during the year. No disposal of Long term investments during the year. All Sales and Purchases were on a credit basis. Interest Income was received as earned. Operating expenses except insurance expenses were paid as incurred. The insurance expense for the year was $2,900. Interest expenses were also paid as incurred. However, Salaries and income tax expenses were accrued. Loan repayment during the year was $35,000. 4. 5. 6. 7. 8. 9. YOU ARE REQUIRED TO: (a) Prepare the Statement of Changes in Equity for the year ended 31 March 2020. Use the template provided in the answer booklet. [10 marks) (b) Prepare the Statement of Cash flows for the year ended 31 March 2020. Use the template provided in the answer booklet. Show all workings (20 marks) (c) Prepare a response to Robert explaining followings: Describe major factors contributing to cash flows during the year including a conclusion concerning the management of cash from the cash flow statement data. [12 marks) Discuss the importance of cash flow statement data than profit-related data. (4 marks) Evaluate Robert's idea to go for "additional funding to operate the business over the next couple of months" in light of the company's financial information for the year ended 31 March 2020. [4 marks) Note: In your response, you have to use financial information mainly from the statement of cash flows that you prepared in (b) however you can also use financial data from the other three statements where relevant to support your arguments. The length of the response should be approximately 300 words. (+/-20 words are allowed) (Total marks for (c) = 20 marks) Hi Five Ltd Statement of Financial Position as at 31 March 2020 2020 ($) 2019 ($) Current assets Cash in the bank 76,500 Accounts receivables 15,270 36,200 Inventory 86,000 98,000 Prepaid Insurance expenses 2,100 1,800 Total current assets 179,870 136,000 Non-current assets Land Plant and equipment Less: Accumulated depreciation Long term Investments Total Non-current Assets Total assets 29,500 156,000 (28000) 7,700 165,200 345,070 23,000 132,000 (20000) 3,280 138,280 274,280 Current liabilities Bank Overdraft Accounts Payable Income tax payable Accrued Salaries Total current liabilities 60,000 8,000 2,000 70,000 29,000 53,800 6,200 3,000 92,000 Non-current liabilities Borrowings Total non-current liabilities Total liabilities 58,800 58,800 128,800 23,280 23,280 115,280 Net assets 216,270 159,000 Shareholders' equity Contributed Equity Land Revaluation Reserve Retained earnings Total shareholders' equity 174,000 14,500 27,770 216,270 127,000 8,000 24,000 159,000 ASSIGNMENT QUESTION 50 MARKS Hi-Five Limited is a privately owned New Zealand company that manufactures and installs efficient windows and doors. The company operates in Auckland and supplies its products to customers nationwide. The Board of Directors will be meeting next Monday afternoon to evaluate the company's current financial situation and to consider the options of surviving in the next couple of months during this unprecedented period. The Managing Director of Hi-Five Ltd, Robert Sparks, was saying that it is very likely additional funding will be required to operate the business over the next couple of months and is also contemplating a share issue sometime in early 2021. You have recently joined the company as an accountant as the previous accountant David has left the company just before the lockdown. David has finalised the statement of comprehensive income and the statement of financial position for the year ended 31 March 2020. The Managing Director asked you to prepare the other two statements: Statement of Changes in equity and the statement of cash flows for the year ended 31 March 2020. He also asked for further information explaining the content of the cash flow statement that you prepared. He is also keen to understand how the cash flow statement figures are different from the profit figures. Robert is an engineer by profession and has limited knowledge of accounting. 0 You have been provided with the following financial statements and additional information. Hi Five Ltd Statement of Comprehensive Income for the year ended 31 March 2020 2020 ($) 2019 ($) Sales 95,000 82,000 Less: Cost of Goods Sold 62,000 47,000 Gross profit 33,000 35,000 Other Income Interest Received 6,200 2,400 Profit on Sale of Plant 8,000 Less: Expenses Operating expenses 11,350 8,975 Salaries 9,800 7,500 Depreciation 10,980 9,650 Bad debts 2,500 2,000 Interest expenses 4,000 2,600 Total operating expenses 38,630) 30,725 Net profit before tax 8,570 6,675 Less: Income tax expense 2,800 1,980 Net profit after tax 5,770 4,6951 Other Comprehensive Income Gain on revaluation of Land 6,500 3,600 Total Comprehensive Income 12,270 8,295