Question 2 - Marwell plc (a) Statement of cash flows for the year ended 31 December 20X2 m 22.14 Cash flows from operating activities Profit before tax Adjustments for: Depreciation Interest payable Loss on disposal of plant Profit on sale of buildings 22.68 16.20 3.78 (6.48) 58.32 Changes in working capital: Increase in inventory Increase in trade receivables Decrease in trade payables Cash generated from operating activities Interest paid Tax paid (8.1 -2.7m) Dividends paid Net cash outflow from operating activities (5.94) (10.26) (4.86 37.26 (16.20) (5.40) (18.36) (2.70) Elliott and Elliott, Financial Accounting and Reporting, 16" edition, instructor's Manual on the Web (b) The cash flow relating to non-current assets occurs at the date that they are acquired. Depreciation is a book entry and not a source of cash. It is added back to the operating profit as a non-cash expense to show that the cash position of a business improves by the amount of operating profit before deducting depreciation. When a non-current asset is sold, the only cash effect is the amount of the disposal proceeds. If a loss has been deducted from the operating profit, this is a non-cash entry and needs to be added back to the operating profit and, if a profit has been included in the operating profit, this needs to be deducted. Question 2 - Marwell plc (a) Statement of cash flows for the year ended 31 December 20X2 m 22.14 Cash flows from operating activities Profit before tax Adjustments for: Depreciation Interest payable Loss on disposal of plant Profit on sale of buildings 22.68 16.20 3.78 (6.48) 58.32 Changes in working capital: Increase in inventory Increase in trade receivables Decrease in trade payables Cash generated from operating activities Interest paid Tax paid (8.1 -2.7m) Dividends paid Net cash outflow from operating activities (5.94) (10.26) (4.86 37.26 (16.20) (5.40) (18.36) (2.70) Elliott and Elliott, Financial Accounting and Reporting, 16" edition, instructor's Manual on the Web (b) The cash flow relating to non-current assets occurs at the date that they are acquired. Depreciation is a book entry and not a source of cash. It is added back to the operating profit as a non-cash expense to show that the cash position of a business improves by the amount of operating profit before deducting depreciation. When a non-current asset is sold, the only cash effect is the amount of the disposal proceeds. If a loss has been deducted from the operating profit, this is a non-cash entry and needs to be added back to the operating profit and, if a profit has been included in the operating profit, this needs to be deducted