T Pty Ltd is a manufacturer of tennis equipment and fashion wear. The statement of financial position as at 30 June 2020 and details of expenses and revenues for the year ending 30 June 2020 are as follows:

Statement of financial position as at 30 June 2020


2020 ($000)
2019 ($000)
Current assets
Cash 135 274
Inventory 2 774 2 486
Prepayments 115 0
Accounts receivable 2 897 2 654
Allowance for doubtful debts (150) (120)
Total current assets 5 771 5 294
Non - current assets
Investment—associated company 1 050 0
Investments 1 216 948
Land 1 500 1 750
Buildings 800 800
Accumulated depreciation—buildings (200) (160)
Plant and equipment 1 025 768
Accumulated depreciation—plant and equipment (100) (548)
Deferred tax asset 312 302
Total non-current assets 5 603 3 860
Total assets 11 374 9 154
Current liabilities
Accounts payable 1 637 1 483
Accruals 1 575 1 110
Lease liability 5 0
Income tax payable 243 83
Provision for employee entitlements 205 298
Provision for deferred payment (relating to investment in Squash Pty Ltd) 50 0
Provision for warranty 314 0
Total current liabilities 4 029 2 974
CDU Business School Faculty of Law, Education, Business and Arts Semester 2, 2017 Page 6 of 2

2020 ($000)
2019 ($000)
Non - current liabilities
Lease liability 15 0
Deferred tax liability 240 75
Borrowings 3 500 3 800
Total non-current liabilities 3 755 3 875
Total liabilities 7 784 6 849
Net assets 3 590 2 305
Shareholders’ equity
Share capital 2 750 2 000
Retained earnings 280 130
Revaluation surplus 560 175
Total shareholders’ equity 3 590 2 305


Statement of profit or loss and other comprehensive income for the year ending 30 June 2020


2020 ($000)
2019 ($000)
Income
Sales 31 394 27 346
Dividends income 51 47
Expenses
Bad debts (90) (85)
Cost of sales (28 205) (24 611)
Doubtful debts (35) (40)
Inventory write-off (50) 0
Warranty expenses (taken to provision for warranty) (314) 0
Depreciation
– Building (40) (40)
– Plant and equipment (100) (60)
Interest (315) (418)
Rent (600) (600)
Salaries and wages (1 324) (1 231)
Finance charges (7) (90)
CDU Business School Faculty of Law, Education, Business and Arts Semester 2, 2017 Page 7 of 2

2020 ($000)
2019 ($000)
Profit before tax 365 218
Income tax (215) (90)
Profit after tax
150

128

Other comprehensive income

Reduction in revaluation surplus as a result of reduction in fair value of land (175) –
Increase in revaluation surplus as a result of increase in fair value of plant and equipment 560 –
Total comprehensive income 535 128


Statement of changes in equity for the year ending 30 June 2020


Share capital ($000)
Retained earnings ($000)
Revaluation surplus ($000)
Total ($000)
Opening balance 1 July 2019 2 000 130 175 2 305
Statement of profit and loss and other comprehensive income – 150 385 535
Issue of shares as part consideration for acquisition of associated company 750 – – –
Balance 30 June 2020 2 750 280 560 3 590

Additional information
• An additional investment of $80 000 is acquired for consideration of tennis equipment costing $80 000. • Land is devalued against a previous increment in the revaluation reserve. The previous increment is fully reversed. • Plant and equipment with a cost of $700 000 and accumulated depreciation of $500 000 are revalued to $1 000 000 during the year. • Plant and equipment with a fair value of $25 000 are acquired under a finance lease. The residual is guaranteed by the lessee. • Plant and equipment are sold for $20 000 cash. Cost is $68 000 and no profit or loss is made on the sale. • During the year, one line of wooden tennis racquets is scrapped at a loss of $50 000, as there is little demand for this range. • During the year, an investment is made in an associated company, Squash Pty Ltd. Consideration is $1 000 000, funded by cash of $250 000 and the balance by the issue of 500 000 shares at $1.50 per share. The purchase agreement includes a clause stating that if profits exceed $110 000 in the first financial year after purchase, additional amounts are payable. Using the formula, an extra $50 000 is provided. • Provision for warranty is based on 1 per cent of sales. • Rent expense of $600 000 is accrued within ‘Accruals’. • Interest expense is paid during the year and dividends are received. • Salaries and wages expense includes the expense for employee entitlements. • The tax rate is 30 per cent.

REQUIRED

Prepare the statement of cash flows in accordance with AASB 107 for the year ending 30 June 2020. Comparatives are not required