Question 4 Cash flow statements [16 marks] (b) (a) Explain why it is important for a...

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Question 4 Cash flow statements [16 marks] (b) (a) Explain why it is important for a business to consistently achieve positive 'Cash flows from operating activities'. (4 marks) Page 10 of 20 Mick-Jones runs his own business which involves selling coffee beans to restaurants, hotels and cafes. The Statement of financial positions are presented for the business for the years ended 30 June 2018 and 30 June 2019. 2019 2018 ($000) ($000) Assets Cash Accounts receivable control 96 36 60 Allowance for doubtful debts (12) (8) Inventory 92 52 Property, plant and equipment 156 120 Accumulated depreciation - property, plant and (36) (20) equipment Total Assets 332 204 Liabilities Accounts payable control 60 60 Wages payable 28 28 Loans payable (Due 2030) 60 40 Total Liabilities 148 128 Net Assets 184 76 Represented by: Equity Share capital (ordinary shares) 168 28 Retained earnings 16 48 % Total equity 184 76 Page 11 of 20 The statement of profit and loss (extract) of Mick Jones for the year ended 30 June 2019 is: Revenues Sales revenue Profit on sale of property Expenses Cost of goods sold Bad debts expense Depreciation expense Wages expense Loss for the year Required: 2019 ($000) 60 12 (40) (8) (20) (36) (32) Prepare a Partial Statement of Cash flows, i.e., Cash flow from Operating activities, for the year ended 30 June 2019. Show all workings. T-account templates are provided on the next two pages if needed. (12 marks) Page 12 of 20 Workings: Debit Credit Debit Credit Debit Credit Page 13 of 20 Workings continued Debit Credit Debit Credit Debit Credit Page 14 of 20 Question 4 Cash flow statements [16 marks] (b) (a) Explain why it is important for a business to consistently achieve positive 'Cash flows from operating activities'. (4 marks) Page 10 of 20 Mick-Jones runs his own business which involves selling coffee beans to restaurants, hotels and cafes. The Statement of financial positions are presented for the business for the years ended 30 June 2018 and 30 June 2019. 2019 2018 ($000) ($000) Assets Cash Accounts receivable control 96 36 60 Allowance for doubtful debts (12) (8) Inventory 92 52 Property, plant and equipment 156 120 Accumulated depreciation - property, plant and (36) (20) equipment Total Assets 332 204 Liabilities Accounts payable control 60 60 Wages payable 28 28 Loans payable (Due 2030) 60 40 Total Liabilities 148 128 Net Assets 184 76 Represented by: Equity Share capital (ordinary shares) 168 28 Retained earnings 16 48 % Total equity 184 76 Page 11 of 20 The statement of profit and loss (extract) of Mick Jones for the year ended 30 June 2019 is: Revenues Sales revenue Profit on sale of property Expenses Cost of goods sold Bad debts expense Depreciation expense Wages expense Loss for the year Required: 2019 ($000) 60 12 (40) (8) (20) (36) (32) Prepare a Partial Statement of Cash flows, i.e., Cash flow from Operating activities, for the year ended 30 June 2019. Show all workings. T-account templates are provided on the next two pages if needed. (12 marks) Page 12 of 20 Workings: Debit Credit Debit Credit Debit Credit Page 13 of 20 Workings continued Debit Credit Debit Credit Debit Credit Page 14 of 20