You are the accountant of Bitter Sweet Ltd, a national retailer of dark chocolate. The statement of profit or loss and statement of changes in equity for the year ended 30 September 2021, and the statement of financial position at 30 September 2021 are shown below. The Managing Director is concerned that while the statement of profit or loss reflects a profit, there has been a decline in the working capital, and overdraft facilities have been required. BITTER SWEET LTD STATEMENT OF 30 SEPTEMBER 2021 Sales Cost of sales Gross Profit Other income: Profit on sale of equipment Operating expenses Profit before tax Income tax expense Profit for the period BITTER SWEET LTD STATEMENT OF 30 SEPTEMBER 2021 PROFIT OR LOSS Balance at 1 October Profit for the period Dividends Issue of share capital Balance at 30 September CHANGES IN EQUITY SHARE CAPITAL 900 000 300 000 1 200 000 FOR FOR THE RETAINED EARNINGS YEAR ENDED N$ 1 200 000 (889 800) 310 200 177 330 144 900 (50 000) 272 230 THE YEAR 124 800 (145120) 289 880 (144 980) 144 900 ENDED TOTAL 1077 330 144 900 (50 000) 300 000 1472 230 BITTER SWEET LTD STATEMENT 30 SEPTEMBER 2021 OF ASSETS Non-currents assets Land and building: carrying amount Equipment: carrying amount Current assets Inventory Trade and other receivable Bank FINANCIAL EQUITY AND LIABILITIES Equity Ordinary share capital Retained earnings Non-current liabilities Interest free long-term loan Current liabilities Trade and other payables Bank overdraft Current tax payable Dividends payable The following additional information is relevant: POSTION FOR 2021 N$ 1 882 500 1 170 000 712 500 188 440 93 200 95 240 2.070 940 1 472 230 1 200 000 272 230 280 000 318 710 49 640 219 070 50 000 2.070 940 THE YEAR ENDED 2020 N$ 1 301 000 1 200 000 101 000 242 120 112 000 76 020 54 100 1543 120 1077 330 900 000 177 330 280 000 185 790 35 790 150 000 1.543 120 1. On 1 July 2021, 200 000 ordinary shares were issued at a price of N$ 1.50 each 2. The land and building were purchased on 30 September 2020 for total cost of N$ 200 000. Land is not depreciated. The building is depreciated on the straight-line basis over a period of 30 years to a nil residual value. 3. On 31 March 2021 all the equipment used by Bitter Sweet Ltd was sold forN$ 200 550. It had been originally purchased for N$ 505 000. This equipment was replaced on 1 April 2021 with new equipment which cost N$ 750 000. This equipment is to be depreciated at 10% per annum on the straight-line method toa nil residual value. 4. Included in the trade other receivables balance at 30 September 2021 is an amount of N$ 2 750 relating to insurance expenses prepaid. The amount included in the trade and other receivable balance for 2020 was N$190. 5. Included in the trade and other payable balance at 30 September 2021 is an amount owing for electricity expenses. The electricity expenses amount to N$ 15 000 per year. However, no amount has been paid for the last three monthsusage. 6. A dividend for 5 cents per share was declared on 25 September 2021. It is to be paid on 30 November 2021. 7. Operating expenses comprises: Electricity Insurance Buildings: depreciation Equipment: depreciation Bad debt Other YOU ARE REQUIRED TO: 15 000 6 750 30 000 62 750 30 320 300 145 120 1. Prepare a statement of cash flows of Bitter Sweet Ltd for the year ended 30 September 2021, using the direct method. (20 marks) 2. Prepare the note for the reconciliation of profit before tax to the cash generated from operations. (5 marks)