. The Balance sheet reveals the firm's assets, liabilities and owners' equity (net worth). But the...

. The Balance sheet reveals the firm's assets, liabilities and owners' equity (net worth). But the cash position of the company also forms a very prominent position in order to know the liquidity of the company. The balance sheet items (in OMR) are taken from Magrib Ltd. for the years 2018 and 2019 respectively:

	2018	2019
Assets
Furniture, Equipment and buildings	100,060	81,040
Current Assets
Inventory	29,300	14,480
Sundry debtors	12,750	15,870
Bank	22,760	9,950
Short term loan	12,750	15,870
Total Assets	177,620	137,210
Equity and Liabilities
Capital and Reserves
Ordinary Share Capital	70,000	50,000
Revaluation reserves	10,000	7,000
Share Premium	11,000	7,000
Retained Earnings	25,700	17,240
	116,700	81,240
Non-Current Liabilities
12% Long term loan	5,250	10,500
Current Liabilities
Sundry creditors	17,900	14,920
Proposed Dividend	10,500	7,500
Taxation	27,270	23,050
	55,670	45,470
Total Equity and Liabilities	177,620	137,210

Additional Information

Interest paid on long term loan was RO1950 during the year

Depreciation on the non-current Asset was RO 7440

Building with a book value of RO11,580 was sold for a loss of RO1400 during the year

From the above Balance sheet items, you are required to calculate: a) Profit before Interest and Tax and prepare b) Cash flow statement for the year 2019
In Cash flow statement, certain items are added and certain items are deducted. From the Cash flow statement, you have prepared, comment on the reasons for adding or deducting those items.

Expert Solution

A. Calculation of
a) Profit before interest & Tax
Retained earnings 2019	17240
Add: Proposed dividend 2019	7500
Add: Taxation 2019	23050
Add: Interest paid	1950
Less: retained earnings 2018	25700

Profit before Interest & Tax	24040


Cashflow from operating activities
Particulars	Amounts
Net profit as per P& L A/c	$ 22,090
Add: Non cash items
Depreciation exp	$ 7,440
Ammortisation exp
Loss on sale	$ 1,400

Less: Non cash items


Add: Increase in Current liab & decrease in current assets
Increase in accrued expenses
Increase in accounts payable
Increase in unearned revenue
Decrease in inventory	$ 14,820


Less: Decrease in Current liab & Increase in current assets
Increase in sundry debtors	$ -3,120
Increase in short term loan	$ -3,120
Decrease in sundry creditors	$ -2,980


Cashflow before Tax	$ 36,530
Less: Tax paid	$ -23,050

Cashflow from operations	$ 59,580


Cashflow from investing activities
Particulars	Amounts
Purchase of Furniture, Equioment & bui	$ -23,460



Cashflow from investing activities	$ -23,460



Cashflow from Financing activities
Particulars	Amounts
Share capital	$ -20,000
Share premium	$ -4,000
Long term loan	$ 5,250
Dividend paid

Cashflow from Financing activities	$ -18,750

Net change in cash & cash equivalents	$ -12,810



Opening balance of cash & cash equivalents	$ 22,760


Closing balance of cash & cash equivalents	$ 9,950

Please Like the solution if satisfied with the answer and if any query please mention it in comments...thanks

ekkarill92 answered 2 years ago

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