Question 3 John Wick, managing director of Wick Limited, has been in business for two years....
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Question 3 John Wick, managing director of Wick Limited, has been in business for two years. He is puzzled by the company's financial statements because, although they show a profit for each year, the bank balance has fallen and is now an overdraft. He asks for your assistance to explain what has happened. The statements of financial position of Wick Limited are as follows: Statement of Financial Position as at 31 December Non-current Assets Property, plant and equipment Current Assets Inventory Trade receivables Bank (cash and cash equivalents) Total Assets Current Liabilities Trade payables Bank overdraft Tax liability Equity Share capital Retained earnings Total Equity Total Liabilities and Equity 2018 £ £ £ Cost Dep'n Carrying amount 3,000 600 5,500 1,750 850 2,500 1,000 5,000 2,000 2,400 8,100 10,500 3,500 7,000 105,000 £ Cost 5,000 2019 £ £ Dep'n Carrying amount 1,600 9,000 2,300 2,750 1,200 1,750 5,000 4,000 3,400 11,300 14,700 5,700 9,000 14,700 Additional information Additional property, plant and equipment (PPE) was purchased. • There were no other revaluations, purchases or disposals of non-current assets. • Taxation paid totaled £ 1,000 • Dividends paid totaled £9,000 • The income statement for the year ended 31 December 2019 include: Depreciation charges, £ 1,000 Finance costs, £250 Taxation of £1,750 You are required to prepare a statement of cash flows for the year ended 31 December 2019 Question 3 John Wick, managing director of Wick Limited, has been in business for two years. He is puzzled by the company's financial statements because, although they show a profit for each year, the bank balance has fallen and is now an overdraft. He asks for your assistance to explain what has happened. The statements of financial position of Wick Limited are as follows: Statement of Financial Position as at 31 December Non-current Assets Property, plant and equipment Current Assets Inventory Trade receivables Bank (cash and cash equivalents) Total Assets Current Liabilities Trade payables Bank overdraft Tax liability Equity Share capital Retained earnings Total Equity Total Liabilities and Equity 2018 £ £ £ Cost Dep'n Carrying amount 3,000 600 5,500 1,750 850 2,500 1,000 5,000 2,000 2,400 8,100 10,500 3,500 7,000 105,000 £ Cost 5,000 2019 £ £ Dep'n Carrying amount 1,600 9,000 2,300 2,750 1,200 1,750 5,000 4,000 3,400 11,300 14,700 5,700 9,000 14,700 Additional information Additional property, plant and equipment (PPE) was purchased. • There were no other revaluations, purchases or disposals of non-current assets. • Taxation paid totaled £ 1,000 • Dividends paid totaled £9,000 • The income statement for the year ended 31 December 2019 include: Depreciation charges, £ 1,000 Finance costs, £250 Taxation of £1,750 You are required to prepare a statement of cash flows for the year ended 31 December 2019
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To prepare the statement of cash flows for the year ended 31 December 2019 well use the indirect method The statement of cash flows is divided into th... View the full answer
Related Book For
Horngrens Accounting
ISBN: 978-0133855371
10th Canadian edition Volume 1
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood
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