Statements of financial position of Snowdrop Ltd are stated on the left. Additional information:

(i) Statement of income for year to 31.5.2011 includes information stated.

(ii) £270,000 was paid as dividend in the year.

(iii) £700,000 was written off as depreciation in the year.

(iv) During the year non-current assets with a written-down value of £200,000 were sold for £180,000.

(v) Loan notes were redeemed at a premium of 10%.

Required:

(a) Prepare a Statement of cash flows for the year ended 31 May 2011.

(b) Comment on the change in the company’s liquidity, based on the information in the Statement of cash flows.

(c) Briefly state some of the ways in which companies could manipulate their year-end cash position.

Transcribed Image Text:

Statements of financial position as at 31 May Non-current assets Inventory Trade receivables Bank Equity and reserves: Ordinary shares Share premium Retained earnings Non-current liabilities: 10% Loan note Current liabilities: Trade payables Taxation Bank overdraft 2011 £'000 4,600 580 360 0 2010 £¹000 2,700 500 230 170 5,540 3,600 £'000 £'000 3,500 2,370 300 150 1,052 470 4,852 0 450 180 58 5,540 2,990 100 365 145 0 3,600