Question

Following data relates to XYZ Company. Based on below data prepare statement of cash flows.
XYZ Co. Ltd.
Balance Sheet
Assets Dec 31, 2009(Rs.) Dec 31, 2010(Rs.)
Cash 135,000 190,000
Marketable Securities 120,000 130,000
A/R & N/R (net) 220,000 250,000
Inventories 300,000 360,000
Investment in stock of subsidiary company 335,000 240,000
Building & Equipment less allowance 800,000 1,040,000
Patents & Goodwill 140,000 36,000
Unamortized bond discount & Issuance cost 30,000 21,600
Total 2,080,000 2,267,600
Liabilities & Equity Dec 31, 2009(Rs.) Dec 31, 2010(Rs.)
Accounts and Notes payable 145,000 180,000
Misc: Accrued liabilities including taxes 65,000 88,200
4% Mortgage Bonds 500,000 400,000
Preferred Stock (Rs. 25par, convertible into two of common) 250,000 240,000
Common Stock (Rs. 10 par) 300,000 432,000
Additional Paid in Capital 200,000 288,000
Retained Earnings 620,000 669,400
Total 2,080,000 2,267,600
In addition to this following information is also available.
1. Stock owned on Mitchell co., a partially owned subsidiary was sold for Rs. 200,000. Stock has original cost
of Rs. 95,000.
2. The entire Goodwill of Rs. 100,000 was written off the books in 2010.
3. The patents have a remaining life of 10 years on Dec 31, 2009 and are being written off over this period.
4. Mortgage bonds mature on July 01, 2010 bonds of Rs. 100,000 were purchased on market at 103½% and
formally cancelled.
5. The decrease in preferred stock outstanding resulted from the exercise of conversion privilege by preferred
stockholders.
6. 10,000 share of common stock were sold during the year at Rs. 18.
7. During the year equipment that cost Rs. 60,000 that had a book value of Rs. 12,000 was sold for Rs.8, 600,
depreciation of Rs 64,000 was taken during the year on building and equipment, balance resulted from
purchase of equipment.
8. The net income for the year transferred to retained earnings was Rs. 99,400.
9. Dividends paid during the year totaled Rs. 50,000
Required:
Prepare Statement of Cash Flows for the year ended December 31, 2010 using indirect method as per the
requirements of IAS-7. Necessary workings must be shown.

Answer 1

Statement of Cash Flow ( Indirect Method)
For the year ended December 31,2010
Particulars		Amount(Rs.)	Working
Cash flows from operating activities
Net income		99,400	Given
Adjustments to reconcile net income to cash flow from operating activities
Depreciation Expense	64,000		Given
Goodwill Written off	100,000		Given
Patent written off	4,000		(140,000 - 100,000 - 36,000 )
Amortization of bond discount	8,400		(30,000 - 21,600 )
Loss on redemption of mortgage bond	3,500		(100,000*3.5% )
Loss on sale of equipment	3,400		(12,000 - 8,600 )
Gain on sale of partially owned subsidiary	-105,000		(95,000 - 200,000 )
Increase in accounts receivables	-30,000		(220,000 - 250,000 )
Increase in inventory	-60,000		(300,000 - 360,000 )
Increase in accounts & notes payable	35,000		(180,000 - 145,000 )
Increase in misc. accrued liabilities including taxes	23,200		(88,200 - 65,000)
		46,500
Cash flows from operating activities		145,900
Cash flows from investing activities
Sale of Equipment	8,600		Given
Purchase of Equipment	-316,000		(800,000 - 120,00 - 64,000 -1,040,000)
Sale of partially owned subsidiary	200,000		Given
Purchase of marketable securities	-10,000		(120,000 - 130,000 )
Cash flows from (used ) investing activities		-117,400
Cash flows from financing activities
Redemption of Mortgage Bond	-103,500		(100,000*103.5% )
Proceeds from issue of common stock	180,000		(10,000*18 )
Dividend paid	-50,000		Given
Cash flows from financing activities		26,500
Net increase in cash and cash equivalents (A)		55,000
Cash and cash equivalents at beginning of period (B)		135,000	Given
Cash and cash equivalents at end of period =A+B		190,000	Given
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