Question two

Among the financial statements that should be presented to shareholders is the statement of financial position and statement cash flow

Required

1. Explain some of the advantages that the statement of cash flow has compared to the statement of financial position (5 marks)

2. Suppose you have been given the income statement for 2020 and the comparative statement of financial positions for 2019 and 2020.

Required

Explain what you will do calculate the cash flow from Operating activities using the indirect method , cash flow from Investing activities and cash flow from financing activities (8 marks)

3. During 2020, PEP earned net income of K576, 000 that included depreciation expense of K117, 000. In addition, the company experienced the following changes in the account balances listed below:

	Increases		Decreases
Accounts payable	K67, 500	Accounts receivable	K18, 000
Inventory	54,000	Accrued liabilities	36,000
		Prepaid insurance	49,500

Required

Calculate PEPs cash flow from operating activities for 2020. (6 marks)

4. Kawambwa Tea company has the following information on selected cash transactions for 2020.

Proceeds from sale of land	K160, 000
Proceeds from long-term borrowings	400,000
Purchases of plant assets	144,000
Purchases of inventories	680,000
Proceeds from sale of Kawambwa tea ordinary shares	240,000

Required

1. Explain the effect of the above on the cash flow (5 marks)
   2. Calculate the cash flow from investing, and financing activities (6 marks)