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SEMINAR QUESTIONS-CASH FLOW STATEMENTS

Question 1:
What are the main benefits in which a firm may accrue in preparation of cash flow
statement

Question 2:

The management of WABISHI Ltd always finds that it is hard pressed for
cash. In spite of borrowing funds at high rate from banks, they are not able
to make payments to suppliers in time. You have been asked why there is
only an extra TZS 700,000 million in bank when the company made a profit
after tax of TZS 4,850,000.

The following are the financial statements of the company for the year ended
December 31st, 2005:

Income statement for the year ended December 31st, 2005.

Details TZS
Operating Profit 10,350,000
Interest expense payable (1,200,000)
Profit before tax 9,150,000
Taxation (4,300,000)
Profit after tax 4,850,000
Dividends (2,100,000)
Retained profit during the year 2,750,000
Retained profit brought forward (1st Jan, 2005) 5,625,000
Retained profit carried forward (31st December, 2005) 8,375,000
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Balance sheet as at December 31st,…..

2005 2004
Details TZS TZS
Capital and Liabilities    
Share Capital 2,000,000 2,000,000
Retained Profit 8,375,000 5,625,000
Long term debt 2,550,000 3,250,000
Creditors 1,500,000 1,250,000
Accrued Interest 135,000 120,000
Proposed Dividends 750,000 600,000
Taxation 4,200,000 2,750,000
  19,510,000 15,595,000
     
Assets    
Vehicles at cost 9,500,000 7,500,000
Provision for depreciation-Vehicles (2,700,000) (1,500,000)
Equipment at cost 4,585,000 3,595,000
Provision for depreciation-Equipment (1,550,000) (600,000)
Stocks 3,000,000 2,000,000
Debtors 4,400,000 3,000,000
Bank 2,200,000 1,500,000
Cash 75,000 100,000
  19,510,000 15,595,000
Note:
Vehicles costing TZS 1,100,000 were sold for TZS 450,000 during 2005
deriving a book profit of TZS 200,000.

Required:
Prepare a cash flow statement for the year ended December 31st, 2005.
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Question 3:
The financial statements of Mtebwa Company Ltd for the financial year ended 31 st
December, 2005 are given below:

  2004 2005
Non-Current Assets TZS TZS TZS TZS
Buildings   142,000   100,000
Plant-Cost 99,000   121,800  
-Depreciation -48,300 50,700 47,500 74,300
         
Preliminary Expenses   2,000   1,000
    194,700   175,300
         
Current Assets        
Bank     52,300  
Debtors 12,000   23,100  
Stocks 12,100   13,000  
Total Current Assets 24,100   88,400  
         
Less: Current Liabilities        
Trade Creditors 8,600   13,400  
Tax Payable 700   900  
Bank Overdraft 4,000      
Dividends 6,000   7,700  
Total Current liabilities 19,300   22,000  
Net Current Assets   4,800   66,400
Total Net Assets   199,500   241,700
         
Ordinary Share Capital   100,000   115,000
Share Premium   10,000   15,000
Profit or Loss   45,000   60,700
8% Debenture   40,000   51,000
10% Unsecured Loan   4,500    
Total Liabilities and Owners
Equity   199,500   241,700
         

Income Statement for the year ended December 31st, 2005:

Sales TZS 191,100
Cost of sales (48,700)
Gross Profit 142,400
Gain (Machinery) 7,700
Operating Expenses (74,835)
Asset revaluation losses (42,000)
Preliminary Expenses (1,000)
Profit before Interest and Tax 32,265
Less: Interest on long-term borrowing (3,865)
Profit before Tax 28,400
Less: Tax (2,000)
Profit available for distribution 26,400
Less: Dividends (10,700)
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Retained Profit for the Year 15,700

Add: Retained Profit b/f 45,000
Retained profit c/f 60,700

The following additional information are also relevant:

1. During the financial year ended 2005, the building in the company
were revalued by a firm of professional valuers. The necessary entries.
2. Operating expenses include audit fees and depreciation but do not
include an interim dividend that was paid in July.
3. Machinery originally costing TZS 14,000 was sold during the year for
TZS 8,200. Company’s policy is to charge full year’s depreciation on all
non-current assets held at the year end and non depreciation in the
year of disposal.

Required:
Prepare cash flow statement in accordance to IAS #7 for both direct and
indirect method.

Question 4:

The balance sheets of KAKAKUONA plc as at 31 March 2005 and 2004 are as
follows
31 March 2005 31 March 2004
TZ. "000" TZ."000" TZ. "000" TZ. "000"
Fixed Assets (net book value) 43,000 32,000
Current assets:
Stock 19,000 18,000
Debtors 9,000 7,500
Bank -------- 4,800
28,000 30,300
Less creditors due for payment
within one year:
Creditors (6,100) (9,900)
Taxation (5,000) (4,000)
Proposed dividends (3,000) (2,000)
Bank overdraft (2,700) --------
(16,800) (15,900)
Net current assets 11,200 14,400
Total net assets 54,200 46,400
Share capital and reserves
Ordinary share capital 24,300 33,200
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Retained earnings 29,900 13,200

54,200 46,400

The summarised income statement of KAKAKUONA plc for the year ended 31
March 2005 was as follows:
TZ."000"
Profit on ordinary activities before tax and interest 25,900
Interest expenses (1,200)
Profit after interest before taxation 24,700
Taxation (5,000)
Profit after tax 19,700
Proposed dividends (3,000)
Retained profits 16,700
Retained profit b/f 13,200
Retained profit c/f 29,900

Supplementary Notes:
i) The assets, which were sold realised Tshs. 1,800,000 which represented a
loss on disposal of Tshs. 3,200,000 when compared with their book value
ii) Assets bought during the financial year to 31 March 2005 cost Tshs.
22,000,000.
iii) Depreciation expenses charged against the profit for the year amounts to
Tshs. 6,000,000.

Required:
Produce a Cash Flow statement of KOMBI limited for the year ended 31 March
2005.