Malthouse and Johnson Limited are a distribution company based in North West England. They have had to replace much of their equipment because of new antipollution regulations in city centres. They have high borrowings and have cut their dividend because of the acquisition of new equipment. The following information has been extracted from their draft financial information Statement of financial position as at 31 March 2020 and 31 March 2019 are as follows: ASSETS Man.ment assets Property, plant and equipment 128.100 82.450 Current assets inventories Trade receivables Cash and Bank 23,800 13.560 2,950 27,019 15,830 4,550 40,310 47,399 TOTAL ASSETS 168,410 120,849 EQUITY AND LIABILITIES Equity Share capital Share Premium Account Revaluation reserve Retained earnings 25,650 12,650 9,400 23,730 10,500 5,350 Mantan Nawes 6% debentures 32,400 30,100 25,500 65,080 26,500 21,211 Current Llobes Provisions Bank overdraft Trade and other payables Accrued interest Current tax payable 2,000 27.860 25.900 18,250 20,130 220 4,900 400 TOTAL EQUITY AND LIABILITIES 5.650 61.810 43.558 168.410 122.819 Statement of comprehensive income for the year ended 31 March 2020 (ES) Revenue Cost of sales Gross Profit Distribution costs 70.788 (38,060) 32,728 (11,240) (7,750) 100 Administrative expenses Interest receivable Interest payable PROFIT BEFORE TAX Tax Expense PROFIT FOR THE PERIOD I (2,700) 11,138 (3,290) 7,848 Statement of changes in retained eamings for the year ended 31 March 2020 25,500 7.848 Retained earnings brought forward at 1/4/2019 Profit for the period Dividends Retained earnings carried forward at 31/03/2020 (948) 32.400 Notes: Comentar During the year ended 31.03.19 the company sold a piece of equipment for 16,060. This equipment had a NBV of 24,920 at the point of sale. This equipment has never been revalued, and there were no other disposals of tangible non-current assets during the year ended 31.03.19 Profit before tax is stated after charging depreciation of 10,230 Required: a) Prepare a cash flow statement in accordance with IAS 7 for the year ended 31 March b) The Income statement showed a profit while the balance sheet shows a large overdraft. How would you explain this, using the cash flow statement you have prepared