The draft financial statements of Socket Limited for the year ended 31 December
ID: 2524385 • Letter: T
Question
The draft financial statements of Socket Limited for the year ended 31 December 2017 are as below:
Statement of profit or loss and other comprehensive income for the year ended 31 December 2017
46,560
Statement of financial position as at 31 December 2017 (with comparative figures)
The following information is available:
1 Profits for the year have been arrived at after charging (crediting):
2 In September 2017, an equipment with a carrying amount of $480 million was sold for a loss of $160 million.
3 The short-term investments represented marketable securities purchased on 25 December 2017. They matured on 28 February 2018.
4. Socket made a rights issue in November 2017 generating additional share capital. There was no other issue of ordinary shares during the year
5. It is Socket Limited’s policy to perform an impairment loss test on its assets at year end. Impairment losses, if any, were written off immediately as expenses
Required:
Prepare the statement of cash flows for the year ended 31 Decemb er 2017, using the indirect method to determine the cash flows from operating activities, for Socket Limited in accordance with HKAS 7 Statement of cash flows.
? ? ? ? $m Revenue ? ? ? ? 168,300 Cost of sales ? ? ? ? -115,850 Gross profits ? ? ? ? 52,450 Administration expense ? ? ? ? -2,750 Distribution expense ? ? ? ? -1,200 Profits before tax ? ? ? ? 48,500 Taxation ? ? ? ? -10,340 Profits for the year (Note 1) ? ? ? ? 38,160 Other comprehensive income ? ? ? ? ? Revaluation of property (net of tax) ? ? ? ? 8,400 Total comprehensive income for the year ? ? ? ?46,560
Explanation / Answer
The 325 Difference is essentially the difference between the comprehensive income reported in the income statement amounting to $46,560 and the amount transferred to the reserve accounts - ther Reserves, Retained Profits and Deferred Tax Liability amounting to (12,700 - 4,300) + (57,300-22,900) + (13,885 - 9,800) = 46,885.
Difference = 46,885 - 46,560 = 325.
Description Amount Comment Net Income for the year before tax including revaluation income 56,900 Add: Non-Operating/Non-Cash expenses Interest Expenses 5,650 Interest is a finance cost. Hence Non-Operating Deprecation Charge 6,300 Deprecation is a non-cash expenditure. Loss on sale of property, plant and equipment 160 Sale of an asset is an investing activity. Impairment loss on intangible assets 500 Impairment is a non-cash expense Inventories written down 270 Inventories written down is a non-cash expense Less: Non-Operating/Non-Cash Incomes Decrease in provision for bad debts -120 Change in Fair Value of Investment Properties -1,000 Income from Revaluation of Assets -8,400 Income net of non-operating and non-cash income/expenses before tax 60,260 Add/Subtract: Changes in Current Assets/ Liabilities Decrease in Inventory 85 Decrease in Trade Receivables 1,310 A decrease in inventory implies liquidation of an asset. Hence added Decrease in Trade Payables -595 A decrease in receivables implies liquidation of an asset. Hence added Increase in Other Payables 300 An increase in short term investments implies utilisation of cash for purchase of an asset. Hence subtracted. Decrease in Interest Payables -100 A decrease in payables implies utilisation of cash for payment of a liability. Hence subtracted Decrease in Tax Payables 625 An increase in liabilities implies a new cash injection through borrowing. Hence added. A decrease in payables implies utilisation of cash for payment of a liability. Hence subtracted Total Cash Flow from Operating Activities before Tax 61,885 An increase in liabilities implies a new cash injection through borrowing. Hence added. Less: Tax -10,340 Cash Flow from Operating Activities 51,545 Cash flow from Investing Activities Purchase/Sale of Property Plant and Equipments -79,670 Net of Change in Tangible Assets excluding Depreciation Charge and Loss on Sale of Asset Revaluation of assets 8400 Cash Flow from Investing Activities -71,270 -13,835 Cash flow from financing activities Share Capital issued through Rights issue 11,700 Interest Expenses -5,650 Interest Added back as a financing cost Increase in Long Term Loans 20,000 Cash Flow from Financing Activities 26,050 Total Cash Inflow During the Year 6,325 Opening Balance of Cash and Cash Equivalents including Marketable Securities 7500 Closing Balance of Cash and Cash Equivalents including Marketable Securities 13,825 Expected Closing Balance of Cash and Cash Equivalents including Marketable Securities 14,150Related Questions
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