PLEASE ATTEMPT PART 2 and 3 ONLY. NO COPY PASTING PLEASE FOR THUMBS UP
Jay & Joy manufacture motor cycle engines. You are provided with their Comprehensive Income Statement, Statement of Financial Position, and additional notes for the year ending December 2019. Comprehensive Income Statement for the Year Ended 31 December 2019 2018 '000 '000 26,400 24,000 Sales Less Cost of Sales Gross Profit -13,200 -10,800 13,200 13,200 1,000 0 Other Income Expenses See Note 2 See Note 1 -8,600 -7,800 Operating Profit 5,600 5,400 Interest Paid -500 0 Profit Before Tax 5,100 5,400 Tax charge See Note 5 -1020 -1,500 Profit After Tax 4,080 3,900 Retained Profit for the Year 2,080 2,400 Retained profit brought forward 6,000 3,600 Retained profit carried forward 8,080 6,000 Comprehensive Income Statement for the Year Ended 31 December 2021 2020 000 000 000 000 Non Current Assets Factory, Plant & Equipment Note 3 At Cost 23250 18000 Accumulated Depreciation Net Book Value Current Assets Inventory Receivables Bank Balance Total Assets Equity & Liability Equity Share Capital (1 share) Retained profit Current Liabilities Payables Tax Creditor Dividend Proposed Bank Overdraft Non Current Liabilities Long Term Loan Total Equity and liabilities Notes to the Financial Statements Note 1 Total expenses Depreciation Distribution Cost Other Expenses Total Expenses Note 2 Other Income Profit on Disposal of Non-current Assets Note 3 Note 4 Note 5 Note 6 -8,250 8,000 5,250 0 3,600 1,020 500 2,550 15000 13250 28250 8,000 8,080 7,670 4,500 28250 2021 '000 2,250 550 5,800 8,600 2019 '000 1,000 -9,000 5,000 4,000 2,500 2,000 1,500 1,000 0 9000 11500 20500 5,000 6,000 4,500 5,000 20500 2020 '000 2,000 50 5,750 7,800 2018 '000 0 Non-current Assets - During the year the company acquired 10,000,00 in new plant and equipment. Plant & Equipment disposed had originally cost 4,750,000 with accumulated depreciation of 3,000,000. Profit on disposal was 1,000,000 Note 4 Purchases have been impacted by inventory levels '000 5,000 Inventory 31/12/2019 Inventory 31/12/2020 Inventory 31/12/2021 5,000 8,000 Note 5 Tax is paid 6 months after year end Note 6 Dividends Dividends have been declared as follows 2020 2021 '000 '000 Paid 30 June in year 1,500 500 500 1,000 Final Proposed at year end, paid April following year Total 2,000 1,500 Required 1) Prepare a Statement of Cash Flow in accordance of IAS 7 (Marks 15%) 2) Distribution manager is pleased that the additional 500,000 expenditure on distribution has resulted in the Operating profit of 5.6m in 2021. Critically comment on this, suggesting other reasons that could have caused the increase. (Marks 10%) 3) The Operations Director has pointed out that although the company has made an Operating profit of 5.6m, the company has an overdraft of 2.55m. Critically comment on why the company's cash position has decreased despite making profit. (Marks 15%) (a) The cost of buying a new head office for a firm that sells oranges in a perfectly competitive market has increased by 2%. What will happen to the price of oranges and the profit maximising quantity of oranges as a result, and why? (12 marks)
