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Problem 70 Dolente Ltd is a small company which designs, manufactures and sells innovative electronic instruments. The directors of the company have discussed the financial

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Problem 70 Dolente Ltd is a small company which designs, manufactures and sells innovative electronic instruments. The directors of the company have discussed the financial statements prepared for the year ended 31 March 2020 and have made the following remarks. "We are surprised to see that we have a loss for the year as our bank balance seems to be healthy and has increased from the 2019 figure". The following are the financial statements of Dolente Ltd for the two years ended 31 March 2020 2020 2019 E000 E000 E000 4000 Statement of Financial Position as at 31 March Non current assets Tangible Intangible 862 820 134 996 128 948 Current assets Inventories 520 488 Trade debtors 280 302 Prepayments 38 46 Bank 166 1.004 214 1.050 Total Assets 2.000 1998 Liabilities 800 820 Creditors falling due within 1 year Creditors falling due after 1 year Loans 462 1262 426 1246 600 500 Equity and reserves Ordinary shares of 1 each Share premium Retained earnings Total Liabilities and Equity 50 50 88 738 102 2.000 1.998 Income Statement for the year ended 31* March 2020 E000 Turnover 2,480 12.004) 476 (290) (134) 52 Cost of sales Gross profit Distribution costs Administrative expenses Operating profit Interest payable Exceptional items Loss before taxation Taxation Loss for the year (46) (20) (14) 114 The following further information is available: (1) Tangible non-current assets: Cost Accumulated Net 000 E000 E000 (60) (26) (34) As at 14 April 2019 1,242 422 820 Additions, at cost 164 164 Disposals Depreciation for the year 88 (88) As at 31" March 2020 1,346 484 862 The assets were sold for cash proceeds of 10,000. Any profit or loss arising is included in the operating profit for the year. (2) Intangible non-current assets: These are patents on innovative electronic instruments. 000 As at 14 April 2019 128 Purchases 40 (14) Amortization (in operating profit) Exceptional write down As at 31st March 2020 (20) 134 (3) Prepayments all relate to expenses charged against operating profits. (4) Creditors falling due within one year 2020 2019 000 E000 Trade creditors 786 650 Accrued interest 14 10 Taxation 160 800 820 Required: (a) Prepare a cash flow statement for Dolente Ltd for the year ended 31" March 2020. (b) Using the information provided by the cash flow statement, comment on the remarks of the directors on the results for the year (120-170 words at least)

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