Question 5

The following statements have been prepared for the company Arrows Ltd for the year ending 30 June 2021.

Balance Sheet of Arrows Ltd

As of 30 June 2021

2021 2020

Current assets

Cash at bank 67 912 27 202

Accounts receivable 15 363 25 645

Inventory 32 560 35 230

Prepaid operating expenses 6 150 4 250

Total current assets 121 985 92 327

Non-current assets

Plant & equipment 177 600 102 850

Accum. Deprec. - plant & equipment (45 790) (33 520)

Land 320 500 220 000

Total non-current assets 452 310 289 330

Total assets 574 295 381 657

Current liabilities

Accounts payable 59 500 63 500

Accrued expenses 35 200 21 500

Provision for tax 28 560 15 200

Total current liabilities 123 260 100 200

Non-current liabilities

Long term loan 300 500 186 400

Total non-current liabilities 300 500 186 400

Total liabilities 483 760 286 600

Net assets $150 535 $95 057

Shareholders' equity

Share capital 80 000 70 000

Retained profits 70 535 25 057

Total shareholders' equity $150 535 $102 057

Income Statement of Arrows Ltd

for the year ended 30 June 2021

Sales 402 410

Less Cost of goods sold 200 820

Gross profit 201 590

Less other expenses

Administration expense 18 250

Salary expense 26 400

Depreciation expense 33 100

Interest expense 4 512

Loss on sale of plant and equipment 3 100

Total expenses 85 362

Profit before tax 116 228

Less Income tax expense (33 200)

Profit after tax $83 028

Statement of Changes in Equity

Shareholders Equity at 01/07/20 95 057

Net profit 83 028

Dividends declared and paid (37 550)

Shareholders Equity at 30/06/21 $150 353

Additional information

The following took place during the year ended 30 June 2021:

i A dividend of $37 550 was declared and paid.

ii Plant and equipment was purchased for cash. In addition, plant and equipment with a cost of $65 000 was sold for cash during the year.

iv A loan of $140,000 was taken out in July 2020 and some of the other loan was repaid during the year. There were no other borrowings apart from this loan.

v Land was sold for cash and some land was purchased for $254 000 cash. There were no other issues of shares for cash.

Required:

1. Complete a cash flow statement for the year ended 30 June 2021.

[12 marks]

2. Comment on Arrowss cash flow statement whether the business maintains a strong cash flows management in operating, investing and financing activities? Suggest any improvement that is necessary for a sustainable cash flow management.