Homework question (27-29 October 2022)

\United Toys Ltd (United Toys) is a fast growing company that manufactures toys. The company is currently experiencing liquidity problems. You have been employed by United Toys for more than four years, assisting them in the preparation of the financial statements, and due to your exceptional expertise, your assistance is needed in the preparation of the statement of cash flows for the year ended 31 December 2021.

The following financial information was presented to you:

Extract of certain line items in the statement of profit or loss and other comprehensive income for the year ended 31 December 2021

N$ 2021 2020

Revenue 350 000 300 000

Other income 12 000 2 000

Interest expense 900 4 500

Dividend income 3 000 4 000

Profit before taxation 120 000 54 900

Statement of financial position as at 31 December 2021

2021 2020

Assets Non-current assets 255 000 164 000

Property plant and equipment 235 000 150 000

Fixed deposits: 36 months 20 000 14 000

Current assets 104 200 93 000

Inventory 50 000 30 000

Trade and other receivables 54 200 43 000

Cash and cash equivalents - 20 000

Total assets 359 200 257 000

Equity and liabilities

Equity and reserves 289 200 175 000

Share capital 121 000 100 000

Reserves: revaluation surplus 35 000 -

Retained earnings 133 200 75 000

Non-current liabilities 17 000 48 000

Interest bearing loan 17 000 48 000

Current liabilities 53 000 34 000

Bank overdraft 21 000 -

Current portion of interest bearing loan 7 000 14 000

Trade and other payables 25 000 20 000

Total equity and liabilities 359 200 257 000

Additional information:

1. Land is not depreciated whilst buildings are depreciated at 2% per annum on the straight line basis.

2. In the determination of operating profit the following items, amongst others, were taken into account: 2021 2020 N$ N$ Depreciation: Machinery ? 15 000 Depreciation: Building 1 050 - Auditors remuneration 2 000 2 000 Directors remuneration 12 000 10 000

3. Other Income of 2016, as per the information provided to you, comprises of the following: Profit on the sale of a portion of land with a cost price of N$20 000 which was sold for N$35 000 during the year. Land was replaced during the year. Profit on the sale of machinery was N$5 000. Loss arising from damage to the inventory caused by flooding during a cloud burst.

4. Trade and other payables were made up as follows: 2021 2020 Trade creditors 17 100 8 500 NAMRA: Income tax 5 000 6 000 Interest payable 900 1 500 Shareholders for dividends 2 000 4 000 Total 25 000 20 000

5. Land was revalued on 31 December 2021.

6. Dividends declared for the year amounted to N$28 200.

7. Income tax for the year was calculated at 28% of taxable income.

8. Included in Trade and other receivables was the deduction of the allowance for credit losses of N$5 000 for the 2021 year and N$3 700 for the 2020 year.

9. During 2021 machinery with a cost price of N$10 000 and accumulated depreciation of N$6 050 on the date of sale, was disposed of.

10. The following represent non-current assets as per the property, plant and equipment note: 2021 N$ 2020 N$ Machinery 152 550 101 500 Cost 215 000 150 000 Accumulated depreciation (62 450) (48 500) Land and buildings 82 450 48 500 Cost 48 500 At revalued amount 83 500 Accumulated depreciation (1 050) -

REQUIRED:

1. Prepare the statement of cash flows of United Toys Ltd for the year ended 31 December 2021, using the direct method. Your presentation should comply with the requirements of IAS 7. Show all calculations. Ignore comparative figures

2. Prepare the note for the reconciliation of profit before tax to cash generated from operations