Chen plcs income statements for the years ended 31 December 2014 and 2015 and the statements of
Question:
Statements of financial position as at 31 December 2014 and 2015
Included in cost of sales, distribution expenses and administrative expenses, depreciation was as follows:
There were no non-current asset disposals in either year. The amount of cash paid for interest equalled the expense in each year. Dividends were paid totalling £18 million in each year.
Required:
Prepare a statement of cash flows for the business for 2015.
2014 2015 £m £m Revenue 207 153 (101) Cost of sales (76) Gross profit Distribution expenses Administrative expenses 77 106 (22) (20) (20) (28) Operating profit Interest payable Profit before taxation 64 29 (4) (4) 60 25 Taxation (16) 44 (6) Profit for the year 19 2014 2015 £m £m ASSETS Non-current assets Property, plant and equipment Land and buildings Plant and machinery 110 130 62 56 172 186 Current assets Inventories 24 25 Trade receivables 26 25 Cash at bank and in hand 19 69 50 Total assets 241 236 EQUITY AND LIABILITIES Equity Called-up ordinary share capital Retained earnings 100 100 56 57 156 157 Non-current liabilities Borrowings – loan notes (10%) 40 40 Current liabilities Borrowings (all bank overdraft) Trade payables 2 37 34 Taxation 3 45 39 Total equity and liabilities 241 236
Step by Step Answer:
Statement of cash flows for the year ended 31 December 2015 Cash flows from investing activities Payments to acquire noncurrent assets Note 4 36 Net c...View the full answer
Accounting and Finance An Introduction
ISBN: 978-1292088297
8th edition
Authors: Peter Atrill, Eddie McLaney
Related Video
Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.
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