Exercise 17.8 ★ ★ W PREPARING A STATEMENT OF CASH FLOWS WITH NOTES The statement of profi t or loss and other comprehensive income and comparative statements of fi nancial position of Blue Inc. were as follows: BLUE INC. Statement of Financial Position as at 31 December 2016 2017 Current assets Cash at bank Cash deposits (30-day) Accounts receivable Allowance for doubtful debts Interest receivable Inventory Prepayments $ 16 000 40 000 110 000 (12 000 2 000 194 000 13 000 ) $ 22 000 70 000 117 000 (16 000 3 000 200 000 9 000 ) 363 000 405 000 Non-current assets Land Plant Accumulated depreciation 230 000 600 000 (140 000) 290 000 700 000 (180 000) Investments in associate Brand names 80 000 120 000 92 000 90 000 890 000 992 000 Total assets $1 253 000 $1 397 000 Current liabilities Accounts payable Accrued liabilities Current tax payable Current portion of long-term borrowings $ 180 000 85 000 40 000 20 000 $ 196 000 92 000 43 000 20 000 325 000 351 000 Non-current liabilities Borrowings Deferred tax liability Provision for employee benefi ts 98 000 35 000 40 000 138 000 40 000 43 000 173 000 221 000 Total liabilities 498 000 572 000 Equity Share capital Retained earnings 500 000 255 000 530 000 295 000 755 000 825 000 Total liabilities and equity $1 253 000 $1 397 000 BLUE INC. Statement of Profi t or Loss and Other Comprehensive Income for the year ended 31 December 2017 Sales Cost of sales $ 1 780 000 (1 030 000) Gross profi t Interest income 750 000 2 000 Share of profi ts of associate Gain on sale of plant 20 000 8 000 Total income 780 000 Expenses Salaries and wages Depreciation Discount allowed Doubtful debts Interest expense Other (includes loss on impairment of brand names $30 000) (352 000 (50 000 (8 000 (6 000 (21 000 (186 000 ) ) ) ) ) ) Profi t before tax Income tax expense 157 000 (47 000) Profi t for the period Other comprehensive income 110 000 — Total comprehensive income $ 110 000 The following additional information has been extracted from the accounting records of Blue Inc.: 1. 30-day cash deposits are used in the course of the daily cash management of the company. 2. Movement in allowance for doubtful debts: Balance 31 December 2016 Charge for year Bad debts written off $ 12 000 6 000 (2 000) Balance 31 December 2017 $ 16 000 3. Land Additional cash purchase $ 60 000 4. Plant Purchases for year (including $50 000 fi nanced by the vendor) $150 000 5. Disposals Cost of disposals Accumulated depreciation $ 50 000 (10 000) 6. Investments in associate accounted for under the equity method Share of profi t Dividends received $ 20 000 8 000 7. Accounts payable Includes amounts owing in respect of plant purchases: 31 December 2016 31 December 2017 $ 12 000 18 000 8. Accrued liabilities Includes accrued interest payable: 31 December 2016 31 December 2017 Interest is classifi ed as an operating activity. $ 4 000 5 000 9. Income tax expense comprises: Current tax payable Deferred tax $ 42 000 5 000 Income tax expense $ 47 000 10. Dividends paid Under a dividend reinvestment scheme, shareholders have the right to receive additional shares instead of dividends. Dividends paid comprise: Dividends paid in cash during the year Dividends reinvested $ 40 000 30 000 Total dividends $ 70 000 Required 1. Using the direct method of presenting cash fl ows from operating activities, prepare a statement of cash fl ows in accordance with IAS 7 for the year ended 31 December 2017. 2. Prepare any notes to the statement of cash fl ows that you consider are required by IAS 7. 3. Prepare the operating activities section of the statement of cash fl ows using the indirect method of presentation in accordance with IAS 7 for the year ended 31 December 2017.