Question
The accountant of Royal Ltd has approached you to assist her with the preparation of the annual financial statements for the year ended 30 June
The accountant of Royal Ltd has approached you to assist her with the preparation of the annual financial statements for the year ended 30 June 2018. The following information has been extracted from the accounting records of Royal Ltd:
In 2017 these were the amounts for the following accounts
Land and buildings 300 000
Plant and machinery (cost) 141 000
Delivery vehicles (cost) 294 000
Listed investments held for sale 157 500
Inventory 96 000
Trade receivables 19 500
Prepaid insurance 600
Rent receivable 1 500
Bank 183 000
Trade payables 42 900
Revaluation surplus 0
Long-term loan 180 000
Credit losses 0
In 2018 these were the amounts for the following accounts
Land and buildings 660 000
Plant and machinery (cost) 180 600
Delivery vehicles (cost) 300 000
Listed investments held for sale 177 000
Inventory 144 000
Trade receivables 16 800
Prepaid insurance 300
Rent receivable 3 750
Bank 18 300
Trade payables 45 000
Revaluation surplus 120 000
Long-term loan 180 000
Credit losses 450
Additional Information:
1. Royal Ltd purchased additional land and buildings for cash during the 2018 financial year. Mr C Windsor, an independent appraiser, revalued the land and buildings at its fair value. This increase in fair value was recorded in the accounting records of Royal Ltd. No land and buildings were sold during the current financial year.
2. On 14 December 2017, Royal Ltd purchased a new delivery vehicle at a cost price of R90 000. This purchase was partially financed by trading in an old delivery vehicle for R6 000. The cost price of the old delivery vehicle was R84 000 and the carrying amount on the date of the trade-in was R12 000. On 17 December 2017, the outstanding amount on the new delivery vehicle was settled in cash. No other delivery vehicles were purchased or sold during the current financial year.
3. On 31 March 2018, Royal Ltd purchased plant and equipment for R36 000 cash. In addition, plant and equipment was sold for cash at its carrying value of R13 600. Additional plant and equipment was purchased for R12 000 cash to replace the plant and equipment that was sold.
4. The cost price of the listed investments was the same as its fair value at the end of the
financial year.
5. The long-term loan was obtained from Spencer Bank on 1 October 2013 and is repayable in 12 equal bi-annual instalments beginning 1 July 2018. The loan is interest-free.
6. Revenue for the year ended 30 June 2018 consisted of credit sales of R448 500 and cash sales of R255 000.
7. During the 2018 financial year, new share issues amounted to R120 000.
8. In addition to the long-term loan, Royal Ltd has loan agreements with three other financial institutions, namely Kentse Bank, Moti Finance and George Bank. The loans bear interest at 15% p.a. on the opening balances of each financial year.
Kentse Bank
Balance at 1 July 2017 60 000
Advances during the year 7 500
Repayments 0
Balance at 30 June 2018 67 500
Moti Finance
Balance at 1 July 2017 30 000
Advances during the year 0
Repayments (9 000)
Balance at 30 June 2018 21 000
George Bank
Balance at 1 July 2017 0
Advances during the year 18 000
Repayments 0
Balance at 30 June 2018 18 000
Required:
1.1 Prepare the cash flows from the investing activities section and the cash flows from financing activities section of the statement of cash flows for the year ended 30 June 2018
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