Q.4. The Rosenberg Company has assembled the accompanying a) Balance Sheet and b) Statement of income and retained earnings for year ending December 2014 Rosenberg Company Balance Sheet as on December 31st 2014 2014 (in Rs. 2013 (in Rs. Million) Million) Equity and Liabilities Shareholder's funds Equity share capital 100 100 Reserves and surplus 101 94 Non-current liabilities Long term debe 50 0 Current liabilities Accounts payable for 74 60 merchandise Accrued tax payable 3 2 328 256 Assets Non Current Assets Fixed Assets Plant, met 204 150 Current assets Prepaid general expense Accounts receivable Inventory Cash 4 42 70 5 328 3 33 50 20 236 275 165 110 Rosenberg Company Statement of Profit and Loss For the year ended December 2014 Sales Less cost of goods sold Inventory, December 31, 2014 50 Purchases 185 Cost of goods available for sale 235 Inventory, December 31, 2014 70 Gross Profit Less other expenses General expenses 51 Depreciation 40 Taxes 10 Net Income Dividends Net income retained Retained eaming, December 2013 Retained eaming, December 2014 101 9 2 7 94 101 On December 30, 2014, Rosenbery paid Rs.98 million in cash to acquire a new plant to expand operations. This was partly financed by an issue of long-term debt for Rs.50 million in cash. Plant assets were sold for their book value of Rs.6 million during 2014. Because net income was Rs.9 million, the highest in the company's history, Jacob Rosenberg, the chief executive officer, was distressed by the company's extremely low cash balance. 1. Prepare a statement of cash flows for 2014 using the direct method for reporting cash flows from operating activities. 2. Briefly explain to Mr. Rosenberg why cash has decreased even though net income was Rs.9 million by making appropriate cakulations Q.4. The Rosenberg Company has assembled the accompanying a) Balance Sheet and b) Statement of income and retained earnings for year ending December 2014 Rosenberg Company Balance Sheet as on December 31st 2014 2014 (in Rs. 2013 (in Rs. Million) Million) Equity and Liabilities Shareholder's funds Equity share capital 100 100 Reserves and surplus 101 94 Non-current liabilities Long term debe 50 0 Current liabilities Accounts payable for 74 60 merchandise Accrued tax payable 3 2 328 256 Assets Non Current Assets Fixed Assets Plant, met 204 150 Current assets Prepaid general expense Accounts receivable Inventory Cash 4 42 70 5 328 3 33 50 20 236 275 165 110 Rosenberg Company Statement of Profit and Loss For the year ended December 2014 Sales Less cost of goods sold Inventory, December 31, 2014 50 Purchases 185 Cost of goods available for sale 235 Inventory, December 31, 2014 70 Gross Profit Less other expenses General expenses 51 Depreciation 40 Taxes 10 Net Income Dividends Net income retained Retained eaming, December 2013 Retained eaming, December 2014 101 9 2 7 94 101 On December 30, 2014, Rosenbery paid Rs.98 million in cash to acquire a new plant to expand operations. This was partly financed by an issue of long-term debt for Rs.50 million in cash. Plant assets were sold for their book value of Rs.6 million during 2014. Because net income was Rs.9 million, the highest in the company's history, Jacob Rosenberg, the chief executive officer, was distressed by the company's extremely low cash balance. 1. Prepare a statement of cash flows for 2014 using the direct method for reporting cash flows from operating activities. 2. Briefly explain to Mr. Rosenberg why cash has decreased even though net income was Rs.9 million by making appropriate cakulations
