On the 1st July 2019 Jerome Ltd recorded at Cash Balance of $500000 overdraft. The following...

On the 1st July 2019 Jerome Ltd recorded at Cash Balance of $500000 overdraft. The following transactions were undertaken by Jerome Ltd during the financial year ended 30 June 2020. Ignore GST.

Paid cash dividends of $240 000.
Sold a long-term government bond, with a carrying amount of $160 000, for $184 000, including $15 000 accrued interest.
Purchased shares in MBW Ltd to be held as an investment for $400 000 cash.
Paid off a long-term $320 000 loan. Interest paid on this loan $18 000.
Received sponsorship funding $220,000
Received from customers 1,172,000.
Issued ordinary shares for cash, $800 000.
Paid Wages to Employees $312,000
Purchased factory machinery, giving $110 000 cash and signing a mortgage loan for $400 000.
Issued 5% debentures to secure funding of $710 000.
Purchased land to be held for future expansion for $850 000 cash.
Income Tax paid $92,000.
Paid to Suppliers $679,000.

Required

A. Prepare the Cash Flow Statement for Jerome Ltd if the Cash Balance at the beginning was an overdraft of ($500 000). Show each of the following sections:

cash flow from Operating Activities
Cash flow from investing activities
Cash flows from financing activities
Cash balance at end of period

16 Marks

Expert Solution

CASH FLOW STATEMENT (DIRECT METHOD):

	Particulars		Amount
A.	OPERATING ACTIVITIES
	Reciepts		1172000
	Cash received from customers	1172000
	Less: Payments		-991000
	Payment to suppliers	-679000
	Wages	-312000
	Cash from operation		181000
	Less: Interest on loan		-18000
	Less: Income tax		-92000
	Cash flow from operating activities		71000

B.	INVESTING ACTIVITIES
	Investment in Shares in MBW ltd	-400000
	Machinery Purchase	-110000
	Purchase of land	-850000
	Sale proceeds from government bond	184000
	Cash flow from investing activities		-1176000

C.	FINANCING ACTIVITIES
	Sponsorship Funding	220000
	Issue of Debentures	710000
	Issue of Ordinary shares	800000
	Less: Dividends	-240000
	Less: Repayment of Long term loan	-320000
	Cash flow from financing activities		1170000
	Cash flow during the period (A+B+C)		65000
	Cash and cash equivalents at the begininging of the year		-500000
	Cash and cash equivalents at the end of the year		-435000

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