QUESTION 4 [21 Marks]

The following information relates to Beethoven Ltd for the year ended 30^th June 2022:

BEETHOVEN LTD

Statement of Financial Performance

as at 30 June 2022

	2022		2021
	$		$
Assets
Current Assets
Cash at bank	67,710		59,666
Accounts receivable	252,760		283,290
Inventory	1,107,600		951,400
Prepaid expenses	113,600		35,500
Total current assets	1,541,670		1,329,856
Non-current assets
Equipment	1,263,800		823,600
Accumulated depreciation equipment	(238,560)		(143,136)
Total non-current assets	1,025,240		680,464
Total Assets	2,566,910		2,010,320
Liabilities
Current Liabilities
Accounts payable	348,916		391,940
Accrued expenses	36,920		44,000
Income tax payable	24,400		28,000
Total current liabilities	410,236		463,940
Non-current liabilities
Bills payable	75,260		45,440
Debentures payable	198,800		284,000
Total non-current liabilities	274,060		329,440
Total Liabilities Net Assets	684,296 1,882,614		793,380 1 216 940
Equity Shareholders Equity
Share capital	1,491,000		852,000
Retained profits	391,614		364,940
Total Equity	1,882,614		1,216,940

Question 4 Contd

The Profit or Loss Statement and general ledger for the year ended 30^th June 2022 reflected the following:

Sales	3,030,053
Less: sales returns	(59,413)
Net sales		2,970,640
Cost of goods sold		1,928,360
General expenses (All expenses EXCLUDING depreciation, bad debts written off & Income tax expense)		606,482
Income tax expense		97,860
Bad debts written off		2,840
Depreciation expense Profit after tax		109,624 $225,474

Additional information:

1. A fully depreciated machine with a cost of $14,200 was scrapped during the year. No proceeds were received when it was scrapped.

2. New equipment was purchased for cash during the year for $454,400.

3. No new debentures were issued during the current year.

4. As at 1^st July 2021, Beethoven had 284,000 shares issued, at an issue price of $3 per share. During the current year, Beethoven issued an additional 213,000 fully paid shares at an issue price of $3 per share.

5. A cash dividend of 40c per share was declared and paid during the year on all issued shares including those issued during the year.

6. Bills payable are used by Beethoven as part of their longer-term cash management and are repayable within five years.

Required:

1. Prepare a cash flow statement for Beethoven Ltd using the Direct method for the year ended 30^th June 2022. [18 Marks]

2. If a business raised capital to finance the purchase of a non-current asset, how would this information be reported in the statement of cash flows? What other information might you see on the statement of cash flows in relation to the increase in capital? [3 Marks].