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CASH FLOW STATEMENT Company 1 Financial position Assets Non-current assets Plant and equipment (including 1,2 leased items) Inventory Trade receivables Cash Total assets Equity and
CASH FLOW STATEMENT Company 1 Financial position Assets Non-current assets Plant and equipment (including 1,2 leased items) Inventory Trade receivables Cash Total assets Equity and liabilities Equity shares of $1 each Retained earnings Lease liability Trade payables (for inventory) Total equity and liabilities. Note Revenue Cost of sales Depreciation Profit from sale of equipment Company 1 Income statement for 2016 Operating profit Interest on lease liability. 2 Note 1 2 31-Dec-16 18,000 16,000 15,000 10,000 59,000 21,200 12,400 5,400 20,000 59,000 For 2016 15,000 (20,000) (2,000) 8,000 1,000 (400) (200) 400 31-Dec-15 20,000 15,000 8,000 - 43,000 15,000 12,000 4,000 12,000 43,000 Income tax expense Profit for the year (Net income) All numbers are in $'000 Note 1. One unit of equipment for sold for $12 000. Note 2. The following table illustrates changes in lease liability during 2016 reporting period: Beginning balance Lease payment Interest expense at 10% 4,000 X 10% = 400 4,000 (1,000) 5,400 Lease payment is allocated to interest first, meaning that redemption of principal part of lease liability was 1,000 - 400 = 600. New leases Ending balance (equipment) 2,000 Company 2 Financial Position Assets Non-current assets Plant and equipment Investment property Loan provided Inventory Trade receivables Cash Total assets Equity and liabilities Equity shares of $1 each Retained earnings Trade payables (for inventory) Provision Income tax payable Total equity and liabilities Note 1 1 3 2 Company 2. Income statement for 2016 Revenue Cost of sales Depreciation Loss from revaluation of investment property Provision for fines and penalties Profit before tax Income tax expense Profit for the year (Net income) 31-Dec-16 21,000 2,000 5,000 2 1,000 35,000 1,000 65,000 40,000 12,000 Note 9,000 1,000 3,000 65,000 For 2016 55,000 (20,000) (10,000) (3,000) (1,000) 21,000 (4,200) 16,800 31-Dec-15 20,000 10,000 7,000 4,000 18,000 59,000 40,000 3,000 15,000 1,000 59,000 All numbers are in $'000 Note 1. During 2016, the Company decided to occupy one of its investment properties and to use it as the Company's head office. Carrying value of this investment property was $5,000 at the moment of occupation. Note 2. Provision for fines and penalties was made due to claim from a client that required. compensation. Legal director of the Company believes that penalty payment is highly probable at the end of 2017. Note 3. Company has provided a 10% loan to another company on 31 Dec 2016, therefore interest income on this loan will be recorded starting from January 1, 2017. 1. Prepare Company 1's COMPLETE CASH FLOW STATEMENT for 2016 (that includes CFO, CFI, CFF) using INDIRECT approach for CFO part. 2. Explain how to treat for accounting purposes occupation of investment property by Company 2 described in Note 1
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