Question 2: Draft financial statements of Hazel plc have been prepared as follows Income Statement Extract for the year end 31 December 2020 is shown below: Operating profit (note 1) Premium paid on loan redemption Interest on loan notes and lease Profit before taxation Taxation Profit after tax E'ooo 856 (55) (28) 763 (124) 639 2020 f'ooo f'ooo 2019 'Ooo E'ooo Statement of financial position as at 31st December Non current assets Property, plant and equipment Development cost Investments Current assets Inventory Trade receivables Cash and bank balance 1.570 135 182 970 108 153 1.887 1,231 526 558 403 502 54 1082 2.969 961 2.192 1.400 75 625 850 50 286 2.100 1.186 Equity and reserves Ordinary shares of 1 each Share primium account Retained earnings Non current liabilities Obligations on lease 6% Loan Notes Deferred tax Current liabilities Trade payable Accrued expenses Obligations on lease Taxation Bank overdraft 230 200 52 162 450 39 482 651 168 131 64 84 108 47 45 53 42 I. 387 2.969 355 2.192 You are informed as follows: (1) (2) Depreciation of 120,000 and amortisation of development cost of 40,000 have been deducted in arriving at operating profit. The fair value of a machine, acquired in the year on a lease, was 175,000 and another, acquired for 140,000, several years earlier and written down to 68,000 was sold at a gain of 9,000. The gain on disposal has been offset from the year's administrative expenses. A cash issue of ordinary share occurred during the year. Dividends are paid immediately when declared, (3) (4) Required: a) Prepare a Statement of Cash Flow for the year ended 31st December 2020 using the format stated in IAS 7 Statement of cash flow. (23 marks) b) Based on the information in the Statement of cash flow, comment on any change in the liquidity position of Hazel plc during the year ended 31st December 2020. (7 marks)