Big Hit (Pty) Ltd is a company based in Cape Town that specialises in buying and selling energy-efficient lighting equipment for residential and commercial use. The company has a 31 December financial year-end.

Provided is an extract of the Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2022:

Notes to the Statement of Profit or Loss: 1. Finance costs The company paid interest on loans, according to Note 5. 2. Other income Other income consists of dividends received during the current financial year.

Provided is an extract of the Statement of Financial Position as at 31 December 2022:

Notes to the Statement of Financial Position:

3. Share capital: Class A The company had 360 000 issued shares in 2021. No further shares were issued for the 2022 financial year.

4. Retained earnings (dividends) On 2 January 2022, the directors declared the only dividend for the financial year at a rate of 25 cents per share. The dividend was paid on 2 January 2022 (Ignore dividend tax).

5. Loans As of 31 December 2021, the company had one outstanding loan amounting to R300 000 with an interest rate of 12% per annum. The loan was settled on 31 December 2022. On 30 June 2022, the company obtained a new loan with an interest rate of 9% per annum. The first interest and instalment on the loan will be due for repayment during the 2023 financial year. As of 31 December 2022, the outstanding loan balance is R550 000.

Additional information: Assume Cash paid to suppliers and employees amounted to R1 757 640. Ignore VAT and dividends tax for this question.

Question 1

1.Prepare an extract of the Statement of Cash Flows of Big Hit (Pty) Ltd for the financial year ended 31 December 2022, using the direct method. Instructions:

Prepare the Cash flows from operating activities.

Prepare the Cash generated from operations.

Prepare the Net cash flow from operating activities.

Ignore Cash flows from Investing and Financing activities.

Show all workings clearly.

Always round up to the nearest rand where applicable.

20 marks

\begin{tabular}{lrr} & Note & \multicolumn{1}{c}{ Rand } \\ Sales & & 2482461 \\ Cost of sales & & (1090688) \\ Gross profit & & 1391773 \\ Operating expenses & & (430585) \\ Operating profit & 1 & 619209 \\ Finance costs & 2 & ? \\ Other income & & ?0400 \\ Interest received & & 600 \\ Profit before tax & & (192480) \\ Taxation & & ? \\ Profit for the year & & ? \\ \cline { 2 - 3 } \end{tabular} \begin{tabular}{lc|r|c|} \hline Current assets & Note & 2022 & 2021 \\ Trade receivables & & R & R \\ Bank & & 148728 & 140659 \\ & & 1971162 & 443145 \\ Equity & & & \\ Share capital: Class A & 3 & 1500000 & 1500000 \\ Retained earnings & 4 & ? & 1567714 \\ Non-current liabilities & & & \\ Loans & 5 & 550000 & 300000 \\ Current liabilities & & & \\ SARS (Income tax) & & 55755 & 37240 \\ \hline \end{tabular} \begin{tabular}{lrr} & Note & \multicolumn{1}{c}{ Rand } \\ Sales & & 2482461 \\ Cost of sales & & (1090688) \\ Gross profit & & 1391773 \\ Operating expenses & & (430585) \\ Operating profit & 1 & 619209 \\ Finance costs & 2 & ? \\ Other income & & ?0400 \\ Interest received & & 600 \\ Profit before tax & & (192480) \\ Taxation & & ? \\ Profit for the year & & ? \\ \cline { 2 - 3 } \end{tabular} \begin{tabular}{lc|r|c|} \hline Current assets & Note & 2022 & 2021 \\ Trade receivables & & R & R \\ Bank & & 148728 & 140659 \\ & & 1971162 & 443145 \\ Equity & & & \\ Share capital: Class A & 3 & 1500000 & 1500000 \\ Retained earnings & 4 & ? & 1567714 \\ Non-current liabilities & & & \\ Loans & 5 & 550000 & 300000 \\ Current liabilities & & & \\ SARS (Income tax) & & 55755 & 37240 \\ \hline \end{tabular}