Fizz Limited is the largest manufacturer of balloons in the country. The statement of profit or loss and statement of changes in equity of Fizz Limited for the year ended 31 December 2020, as well as the statement of financial position of the company at 31 December 2020, are shown below:

FIZZ LIMITED Statement of profit or loss for the year ended 31 December 2020

Sales 300,000

Cost of sales (200,000)

Gross profit 100,000

Operating expenses

Selling expenses 10,000

Administration expenses 7,000

Loss on disposal of equipment 1,000

Depreciation 8,000

Profit before tax 74,000

Income tax expense (29,600)

Profit for the period 44,400

FIZZ LIMITED Statement of changes in equity for the year ended 31 December 2020

Details	Share Capital	Retained Earnings	Total
Balance at 01/01/X6	100 000	10 000	110 000
Profit for the period		44 400	44 400
Dividends		(20 000)	(20 000)
Issue of share capital	10 000		10 000
Balance at 31/12/X6	110 000	34 300	144 400

Fizz Limited

Statement of Financial Position as at 31 December 2020

	2020	2019
ASSETS
Non- current assets	85 000	80 000
Equipment at cost	100 000	89 000
Accumulated depreciation	15 000	9 000
Current Assets	109 800	70 500
Inventories	60 000	40 000
Accounts receivable	12 000	20 000
Selling expenses paid in advance	1 200	1 500
Bank	36 600	9 000
	194 800	150 500
EQUITY AND LIABILITIES
Equity
Share capital	110 000	100 000
Retained earnings	34 400	10 000
Non-current liabilities
Loan	10 000	20 000
Current Liabilities
Accounts payable	20 600	10 000
Administrative expenses payable	800	500
Current tax payable: income tax	19 000	10 000
	194 800	150 500

Equipment costing N$15,000 was purchased during the year when certain other equipment was traded in as part of the purchase price.

REQUIRED:

a) Prepare a statement of cash flows of Fizz Limited for the year ended 31 December 2020 using the direct method. (25 marks)

b) Prepare the note to the statement of cash flows for the reconciliation of profit before tax to cash generated from profits for the year ended 31 December. (10 marks