Question

The following information was extracted from the accounting records of Belle Mare Limited

Statement of Comprehensive Income for the year ended 31 December

	2018 (R)		2017 (R)
Sales	1 856 000		1 200 000
Cost of sales	(1 280 000)		(750 000)
Gross profit	576 000		450 000
Operating expenses	(291 200)		(212 000)
Depreciation	30 000		26 000
Other operating expenses	261 200		186 000
Operating profit	284 800		238 000
Interest on mortgage loan	(24 000)		(72 000)
Profit before tax	260 800		166 000
Income tax	(90 240)		(58 100)
Profit after tax	170 560		107 900

Statement of Financial Position as at 31 December

	2018 (R)		2017 (R)
ASSETS
Non-current assets	2 464 160		2 444 000
Property, plant & equipment	2 464 160		2 444 000
Current assets	356 000		336 000
Inventories( all Trading Inventory)	120 000		250 000
Trade & other receivables	40 000		64 000
Cash & cash equivalents	196 000		22 000
	2820 160		2780 000

	2018 (R)		2017 (R)
EQUITY & LIABILITIES
Equity	2 437 560		1 980 000
Ordinary share capital (issue at R10 each)	2 180 000		1 760 000
Retained income	257 560		220 000
Non-current liability (Mortgage loan at 12% p.a.)	200 000		600 000
Current liabilities	182 600		200 000
Trade & other payables	98 000		138 000
South African Revenue Services (income tax)	8 600		6 000
Shareholders for dividends	76 000		56 000
	2 820 160		2 780 000

Additional information

• New shares were issued on 1 January 2018
• Interim and final dividends for the year ended 31 December 2018 amounted to R133 000
• Fixed assets were sold at carrying (book) value during the year for R144 000

Required:

Study the information provided above by Belle Mare Ltd and prepare the Statement of Cash Flows (using the indirect method) for the year ended by December 2018

Answer 1

STATEMENT OF CASH FLOWS
Cash flows from operating activities:
Net income		R 1,70,560
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	R 30,000
Decrease in trade and other receivables	R 24,000
Decrease in inventory	R 1,30,000
Increase in SARS	R 2,600
Decrease in trade and other payables	R -40,000	R 1,46,600
Net cash provided by operating activities		R 3,17,160
Cash flows from investing activities:
Purchase of PPE [2464160-2444000+144000+30000]	R -1,94,160
Sale of fixed assets	R 1,44,000
Net cash used investing activities		R -50,160
Cash flows from financing activities:
Repayment of non-current liability	R -4,00,000
Issue of ordinary shares	R 4,20,000
Payment of cash dividends [56000+133000-76000]	R -1,13,000
Net cash provided by financing activities		R -93,000
Net increase in cash		R 1,74,000
Beginning balance of cash & cash equivalents		R 22,000
Ending balance of cash & cash equivalents		R 1,96,000