Etinargemop SA (ESA) produces various fruit juices in its factory near Malaga in Spain. It has just finished its financial year to 31 March 2020. It has been an excellent year for the company with record order intake and sales shipped. Recent expansion has been rapid with new wholesale outlets being opened at the rate of two per quarter, resulting in a major increase in ESA's market share In addition, ESA has invested a considerable amount of sales and advertising expenditure in developing its own special brand - Revolution Red, a juice made from an unusual blend of fruits. The Board of Directors estimates that ESA has spent 345,000 on a combination of: advertising on European television special briefings at luxury hotels in the South of France for a group of industry experts launches at major trade shows in Madrid, Paris, Berlin and New York. The sales and marketing director believes that the new brand has been accepted enthusiastically by the public, with sales showing encouraging early growth, leading to optimism for a successful future for Revolution Red. The financial statements to 31 March 2020 have just been completed, prior to the visit of the company's external auditors. At a meeting of the company's Board of Directors on 13 May, the CFO revealed the draft operating results and the Balance Sheet at 31 March 2020 (together with comparative figures for 2019). Income Statement Revenue Cost of sales Gross profit Year ended 31-Mar-20 '000 7.456 4,514 2,942 Year ended 31-Mar-19 '000 5,274 2,468 2,806 Administrative costs Marketing and selling costs Distribution costs Depreciation (see note 1) Operating profit Interest payable Profit before taxation Corporate taxation on profit Profit attributable to shareholders Dividends Retained profit for financial year Balance Sheet 820 500 595 280 747 32 715 157 558 100 458 745 300 546 240 975 8 967 2014 763 75 Year ended 31-Mar-20 '000 Year ended 31-Mar-19 000 Nowowww Fruit juice production equipment (see note 2) Other long-term assets 1,200 50 1,250 900 25 925 Current Inventory Trade debtors Cash at bank 975 1,586 550 850 250 1.650 2,561 Corse www falling de within our yur Bank overdraft Creditors (see note 3) 45 725 770 855 855 Net current assets 1,791 795 Total assets less current liabilities 3,041 1,720 Required: Prepare a Cash Flow Statement for the year to 31 March 2020. Show all workings 1. 2. Comment on the major movements in cash over the year, providing an explanation for the various queries on profitability and cash raised at the Board mecting want 400 words) Review the sales and marketing director's proposal to capitalise the expenditure on the Revolution Red product in the context of the accounting treatment of brands and the likely response of the auditors, 200 words) 3. Total 25 marks 1. Required: Prepare a Cash Flow Statement for the year to 31 March 2020. Show all workings, (14 marks) 2. Comment on the major movements in cash over the year, providing an explanation for the various queries on profitability and cash raised at the Board meeting (6 marks - maximum word count 400 words) Review the sales and marketing director's proposal to capitalise the expenditure on the Revolution Red product in the context of the accounting treatment of brands and the likely response of the auditors. (5 marks - maximum word count 300 words) Total 25 marks 3. Etinargemop SA (ESA) produces various fruit juices in its factory near Malaga in Spain. It has just finished its financial year to 31 March 2020. It has been an excellent year for the company with record order intake and sales shipped. Recent expansion has been rapid with new wholesale outlets being opened at the rate of two per quarter, resulting in a major increase in ESA's market share In addition, ESA has invested a considerable amount of sales and advertising expenditure in developing its own special brand - Revolution Red, a juice made from an unusual blend of fruits. The Board of Directors estimates that ESA has spent 345,000 on a combination of: advertising on European television special briefings at luxury hotels in the South of France for a group of industry experts launches at major trade shows in Madrid, Paris, Berlin and New York. The sales and marketing director believes that the new brand has been accepted enthusiastically by the public, with sales showing encouraging early growth, leading to optimism for a successful future for Revolution Red. The financial statements to 31 March 2020 have just been completed, prior to the visit of the company's external auditors. At a meeting of the company's Board of Directors on 13 May, the CFO revealed the draft operating results and the Balance Sheet at 31 March 2020 (together with comparative figures for 2019). Income Statement Revenue Cost of sales Gross profit Year ended 31-Mar-20 '000 7.456 4,514 2,942 Year ended 31-Mar-19 '000 5,274 2,468 2,806 Administrative costs Marketing and selling costs Distribution costs Depreciation (see note 1) Operating profit Interest payable Profit before taxation Corporate taxation on profit Profit attributable to shareholders Dividends Retained profit for financial year Balance Sheet 820 500 595 280 747 32 715 157 558 100 458 745 300 546 240 975 8 967 2014 763 75 Year ended 31-Mar-20 '000 Year ended 31-Mar-19 000 Nowowww Fruit juice production equipment (see note 2) Other long-term assets 1,200 50 1,250 900 25 925 Current Inventory Trade debtors Cash at bank 975 1,586 550 850 250 1.650 2,561 Corse www falling de within our yur Bank overdraft Creditors (see note 3) 45 725 770 855 855 Net current assets 1,791 795 Total assets less current liabilities 3,041 1,720 Required: Prepare a Cash Flow Statement for the year to 31 March 2020. Show all workings 1. 2. Comment on the major movements in cash over the year, providing an explanation for the various queries on profitability and cash raised at the Board mecting want 400 words) Review the sales and marketing director's proposal to capitalise the expenditure on the Revolution Red product in the context of the accounting treatment of brands and the likely response of the auditors, 200 words) 3. Total 25 marks 1. Required: Prepare a Cash Flow Statement for the year to 31 March 2020. Show all workings, (14 marks) 2. Comment on the major movements in cash over the year, providing an explanation for the various queries on profitability and cash raised at the Board meeting (6 marks - maximum word count 400 words) Review the sales and marketing director's proposal to capitalise the expenditure on the Revolution Red product in the context of the accounting treatment of brands and the likely response of the auditors. (5 marks - maximum word count 300 words) Total 25 marks 3