SECTION B Instruction: Complete ALL questions from this section. Question 1 Cash flow statement for the year ended 31 December 2019 $ $ Cash flows from operating activities Profit before interest and tax 405,500 Adjustments for: Depreciation 30,000 Write off of goodwill 25,000 Gain on disposal of assets (13,000) Increase in inventories (4,000) Decrease in trade receivables 4,000 Increase in trade payables 8,000 Interest paid (8,500) Taxation paid (115,000) Net cash flow from operating activities 332,000 Cash flow from investing activities Purchase of assets (368,000) Sale of assets 85,000 Net cash flow from investing activities (283,000) Cash flow from financing activities Issue of shares (including premium) 60,000 Redemption of long-term borrowings (85,000) Dividends paid (25,000) Net cash flow from financing activities (50,000) Net increase in cash and cash equivalents (1,000) Cash and cash equivalents at the beginning of the period 32,000 Cash and cash equivalents at the end of the period 31,000 ACCT3801 21/01 The Council of Community Colleges of Jamaica Page 6 Analysis of changes in cash and cash equivalents Year 1 Year 2 Change Bank (5,000) 10,000 15,000 Cash 7,000 1,000 (6,000) Short term investment 30,000 20,000 (10,000) Total 32,000 31,000 (1,000) Required: A. Discuss Anthonys THREE (3) purposes of a cash flow statement. (6 marks) B. Comment on the performance of the company citing relevant items from the cash flow statement that will help Anthony understand the companys position. (10 marks) C. Suggest FOUR (4) strategies that a company can implement to improve its cash flow position. (4 marks) (Total 20 marks)

Question 2 Gar, Mur and Wil were partners, in a firm, sharing profits and losses equally. Their capitals were not equal. There was no partnership deed. The firm dissolved on 30th June 2020. The position was as follows, after dissolution: Balance Sheet as of June 30, 2020 Liabilities $ Assets $ Gar capital a/c 2500 Mur capital a/c 314 Cash 1916 Wil capital 263 Loss on realisation 635 Wil became insolvent and could not pay anything against the capital deficiency. ACCT3801 21/01 The Council of Community Colleges of Jamaica Page 7 Required A. Explain the decision that may be taken due to Wils insolvency. Show workings to support your response. (8 marks) B. In such a case, how the deficiency would be treated by the insolvent partners capital account? (2 marks) C. Prior to the Garner vs Murrays rule, Mur had raised an objection and claimed that the loss is a capital loss and not a business loss. Therefore, such loss due to capital deficiency of a partner to be borne in capital ratio and not in profit sharing ratio. In court, Mur got the decision in his favour. Explain FOUR (4) points in the Garner vs Murray decision? (10 marks)

Question 3 Issue of shares JB Milks Ltd invited applications for 300,000 5% Preference shares of $1 each at $1.40, payable: 40% on application, 80% on allotment (including premium) 20% on first and final call All the allotment money was received but a holder of 10,000 shares failed to meet the call and forfeited his shares in accordance with the articles of the company. All forfeited shares were subsequently re-issued as fully paid shares at 80 cents each. Required: A. i. Prepare the following Accounts: ii. Application & Allotment Account (2 marks) iii. Preference Share Capital Account (3 marks) iv. Share Premium Account (2 marks) v. Bank Account (3 marks) vi. First & Final Call Account (2.5 marks) vii. Investment: Own Share Account B. Explain the following terms: i. Forfeiture (2.5 marks) ii. Redemption of shares (2.5 marks) iii. Earnings per Share (2.5 marks)