QUESTION 2 (35 MARKS) The following information relates to Laser Ltd for the year ended 31 August 2016: Laser Ltd Statement of financial position as at 31 August 2016 2016 2015 N$ N$ ASSETS Non-current assets 33 690 000 28 350 000 Land and buildings 24 100 000 18 500 000 Machinery and equipment 10 520 000 8 900 000 Accumulated depreciation - machinery & equipment (3 200 000) (1 950 000) Vehicles - net book value 2 270 000 2 550 000 Investment at BNF Bank 350 000 Current assets Inventory Accounts receivable Cash and cash equivalents 628 520 342 000 164 000 122 520 34 318 520 512 000 360 000 152 000 28 862 000 EQUITY AND LIABILITIES Equity Share capital 10% convertible preference shares Share premium Revaluation reserve - land and buildings Retained earnings Non-current liabilities Mortgage bond 25 507 824 22 779 800 675 000 285 000 1 600 000 168 024 20 486 300 17 720 000 1 350 000 570 000 0 846 300 5 562 000 4 680 000 Current liabilities Accounts payable Shareholders for dividends NaMRA dividend withholding tax Rent income received in advance Bank overdraft Current portion of long-term debt NaMRA: Income tax payable 3 248 696 136 000 2 021 467 356 729 22 000 3 695 700 131 000 2 450 550 432 450 24 000 16 500 520 000 121 200 28 862 000 618 000 94 500 34 318 520 The following information was extracted from the accounting records of Laser Ltd in relation to the statement of profit or loss and other comprehensive income for the year ended 31 August 2016: 2016 NS Revenue 13 600 000 Sales 13 612 000 Sales retums ( 12 000) Cost of sales 6 838 000 Opening inventory 360 000 Purchases 6 820 000 Less: closing inventory ( 342 000) Gross income 6 762 000 Other income 77 000 Gain on sale of equipment 10 000 Rent income 42 000 Interest on investment 25 000 Expenses (4 478 000) Interest on mortgage bond 620 000 Loss on sale of vehicle 8 000 Other operating expenses 3 850 000 Profit before tax 2 361 000 Tax 661 080 Profit before other comprehensive income 1 699 920 Revaluation of land and buildings 1 600 000 Total comprehensive income 3 299 920 Additional Information You can accept that the cash paid to suppliers and employees amounted to N$8 795 000. Dividends At the beginning of the financial year, it was approved that 60% of the dividend owing to shareholders on 31 August 2015, be paid through a capitalisation issue of ordinary shares at N$6.00 per share and the remainder in cash. The shareholders and the Namibian Revenue Agency ("NaMRA"), were both paid on 20 September 2015. Dividends declared at the end of August 2016, will be paid in October 2016 Share capital Authorised share capital 8 000 000 ordinary shares with no par value; and 1 000 000 10% convertible preference shares at N$2.25 par value. Issued share capital at 1 September 2015 3 000 000 ordinary shares; and 600 000 10% convertible preference shares issued at N$3.20 per share. At the beginning of September 2015, the company was given approval that 50% of the 10% convertible preference shares were to be converted to ordinary shares at a conversion price of N$6 per share. Property, plant and equipment During the year, equipment with a cost price of N$200 000 and accumulated depreciation of N$140 000 was sold. This equipment was replaced and N$1 500 000 of equipment was purchased for expansion purposes and was installed in the new building. A vehicle with a cost of N$160 000 and accumulated depreciation of N$120 000 was sold during the year and replaced with a new vehicle costing N$240 000. Depreciation is included in other operating expenses. REQUIRED: a) Prepare the statement of cash flows, using the direct method, including the reconciliation note, for Laser Ltd for the year ended 31 August 2016. Show the calculation for cash received from customers - balancing figure will not be accepted. Comparative figures are not required. (31 marks) b) In your opinion, did the company manage its cash resources wisely during the year? Comment briefly. (4 marks)