Question

QUESTION TWO
The following are financial statements of Buchi Ltd for the year ended 31 December 2019
Statement of comprehensive income for the year ended 31 December 2019
K
K
Revenue
900 000
Cost of sales
475 000
Gross profit
425 000
Operating expenses
220 000
Interest
13 000
Loss on sale of equipment
2 000
(235 000)
Net profit before tax
190 000
Tax
65 000
Net profit after tax
125 000
Statement of financial position as at 31 December 2019
2019
2018
Non-current assets
K
K
K
K
Land
55 000
80 000
Buildings
180 000
190 000
Equipment
155 000
48 000
Current assets
Stock
50 000
0
Prepaid expenses
3 000
5 000
Debtors
67 000
25 000
Cash
55 000
30 000
175 000
68 000
565 000
386 000
Equity and liabilities
Ordinary share capital
230 000
70 000
Retained income
196 000
126 000
426 000
196 000
Non-current liabilities
Debentures
106 000
150 000
Current liabilities
Creditors
33 000
40 000
565 000
386 000
6
You are given the following additional information:
1. Depreciation amounting to K33 000 and amortisation of prepaid expenses of K2 000 are included in operating expenses.
2. Equipment that cost K41 000, with a book value of K36 000 was sold for K34 000.
3. Dividends of K55 000 were declared and paid during the year.
Required
(a) Describe the importance of the cash flow statement.
(b) Prepare the statement of cash flows for Buchi Ltd for the year ended 31 December 2019 using the indirect method.

Answer 1