Question 3

Merlion Ltd reports the following information for the financial year 20X7.

(ii)

Required:

Revenue Expenses Salaries expenses Utilities expense Depreciation expense Other expenses Net profit/(loss)

Accounts receivable Salaries payable Accrued expenses

150,000

102,000 42,000 43,800 10,200

(48,000)

As at 31 March 20X7

As at 31 March 20X6

(i) For the year ended 31 March 20X7 $

1. (a) Prepare the operating activities section of the statement of cash flows using the indirect method assuming the company did not have any tax expenses for the year.

   (7 marks)

2. (b) Mr Henry Lim, the CEO was surprised to note that despite the hefty loss, the company was still able to generate a positive cash flows. Examine the partial statement of cash flows and draft a report to explain the likely reasons for the positive cash flow from operations.

   (8 marks)

3. (c) Mr Henry Lim is unsure of the purpose of the statement of cash flows. Explain to him, the reporting purpose of the statement of cash flows. Identify three questions that this statement can provide answer to.

   (5 marks)

Question.3 Merlion Ltd reports the following information for the financial year 20X7. (i)For the year ended 31 March 20X7 Revenue 150,000 Expenses 102,000 Salaries expenseS Utilities expense Depreciation expense Other expenses 42,000 43,800 10,200 Net profit/(loss) (48,000) As at As at 31 March 20X731 March 20X6 7,000 28,000 5,000 35,000 Accounts receivable Salaries payable Accrued expenses 2,000 21,000 Required: (a) Prepare the operating activities section of the statement of cash flows using the indirect method assuming the company did not have any tax expenses for the year. (7 marks) (b)Mr Henry Lim, the CEO was surprised to note that despite the hefty loss, the company was still able to generate a positive cash flows. Examine the partial statement of cash flows and draft a report to explain the likely reasons for the positive cash flow from operations (8 marks) Mr Henry Lim is unsure of the purpose of the statement of cash flows. Explain to him, the reporting purpose of the statement of cash flows. Identify three questions that this statement can provide answer to (c)