QUESTION THREE $(40$ Marks$)$

The summarised management statements of Dunmore Limited are asfollows:

DUNMORE LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED$31$ DECEMBER

$2013$

R R

Sales $300000$

Cost of sales $(202000)$

Gross profit $98000$

Interest received $5000$

Profit on disposal of equipment $5000$

Interest paid $6000$

Depreciation

Equipment $30000$

Vehicles $9000$

Loss on disposal of vehicle $1000$

Other expenses $16500$

Profit before taxation $45500$

Income tax expense $(23500)$

Profit for year $22000$

DUNMORE LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED $31$ DECEMBER $2013$

$115$

Share capital Share Premium Retained earnings Total

R R R R

Balance on $1$

January $2013$

$100000-22500122500$

Profit for

the year

$2200022000$

Dividends $(2000)(2000)$

Issue of shares $10500015000120000$

Balance on $31$

December $2013$

$2050001500042500262500$

DUNMORE LIMITED STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER $2013$

$116$

$20122013$

R R

ASSETS $96000230000$

Equipment $70000200000$

Cost price $100000240000$

Accumulated depreciation $(30000)(40000)$

Vehicles $2600030000$

Cost price $5600062000$

Accumulated depreciation $(30000)(32000)$

Investments $-50000$

Current assets $5000078500$

Inventories $2000018000$

Debtors $1500030000$

Bank $1500030500$

Total assets $146000358000$

EQUITY AND LIABILITIES

Share capital $100000205000$

Share premium $-15000$

Retained earnings $2250042500$

$122500262500$

Non$-$current liabilities

Debentures $-60000$

Current liabilities $2350036000$

Creditors $2000010000$

South African Revenue

service

$300024500$

Shareholders for dividends $5001500$

Total equity and liabilities $146000358500$

Additional information:

$1.$ Equipment originally bought for R$50000,$ with a net book value of R$30000$ was sold during the

year. New equipment was bought to replace the equipment sold.

$2.$ The capacity of the plant was expanded through the purchase of new equipment to the value of

R$100000.$

$117$

$3.$ A vehicle which cost R$10000,$ with a net book value of R$3000,$ was sold during the year. A new

vehicle was bought to replace the vehicle disposed of$.$

REQUIRED:

$3\mathrm{.}1$ Prepare the statement of cash flows for Dunmore Limited for the ended $31$ December

$2013$ using the indirect method $(26)$

$3\mathrm{.}2$ Explain the difference between the direct method and indirect method of presenting cash flow

statements.