QUESTION TWO The following are financial statements of Buchi Ltd for the year ended 31 December 2019 Statement of comprehensive income for the year ended 31 December 2019 900 000 475 000 425 000 Revenue Cost of sales Gross profit Operating expenses Interest Loss on sale of equipment 220 000 13 000 2 000 Net profit before tax (235 000 190 000 65 000 125 000 Net profit after tax Statement of financial position as at 31 December 2019 2019 2018 | 55 000 80 000 180 000 190 000 155 000 48 000 Non-current assets Land Buildings Equipment Current assets Stock Prepaid expenses Debtors Cash 50 000 3 0001 67 000 55 000 5 000 25 000 30 000 175 000 1 565 000 687000 386.000 Equity and liabilities Ordinary share capital Retained income 230 000 196 000 426 000 70 000 126 000 196 000 106 000 150 000 Non-current abilities Debentures Current liabilities Creditors 33 000 565 000 40 000 33361000 You are given the following additional information: 1. Depreciation amounting to K33 000 and amortisation of prepaid expenses of K2 000 are included in operating expenses. 2. Equipment that cost K41 000, with a book value of K36 000 was sold for K34 000. 3. Dividends of K55 000 were declared and paid during the year. Required (a) Describe the importance of the cash flow statement. [8 Marks) (b) Prepare the statement of cash flows for Buchi Ltd for the year ended 31 December 2019 using the indirect method. [12 Marks) [TOTAL: 20 Marks]