Question

Following is the Balance Sheet of Future Retail Mart and from the additional information as on 31-03-2017. Prepare Cash Flow Statement.

$\begin{array}{cccc}\text{Particulars}& \text{Note}& 31-03-2017& 31-03-2016\\ & \text{No.}& \left(\text{Rs}\right)& \left(\text{Rs}\right)\\ \text{I. EQUITY AND LIABILITIES}& & & \\ \text{(1) Shareholder's Funds:}& & & \\ \text{(a) Share Capital}& & 5,50,000& 4,75,000\\ \text{(b) Reserves and Surplus}& 1& 1,75,000& 50,000\\ \text{(2) Non-current Liabilities:}& & & \\ \text{Long-term Borrowings}& 2& 2,25,000& 50,000\\ \text{(3) Current Liabilities:}& & & \\ \text{(a) Short-term Borrowings}& 3& 75,000& 37,500\\ \text{(b) Short-term Provisions}& 4& 1,00,000& 62,500\\ \text{Total}& & 11,25,000& 6,75,000\\ \text{II. ASSETS}& & & \\ \text{(1) Non-current Assets:}& & & \\ \text{(i) Fixed Assets}& & & \\ \text{(a) Tangible}& 5& 8,07,500& 4,52,500\\ \text{(b) Intangible}& 6& 50,000& 75,000\\ \text{(ii) Non-current Investment}& & 1,50,000& 50,000\\ \text{(2) Current Assets:}& & & \\ \text{(a) Current Investments}& & 20,000& 35,000\\ \text{(b) Inventories}& 7& 61,000& 36,000\\ \text{(c) Cash and Cash Equivalents}& & 36,500& 26,500\\ \text{Total}& & 11,25,000& 6,75,000\end{array}$

Notes to Accounts :

$\begin{array}{cccc}\text{Note}& \text{Particulars}& 31-03-2017& 31-03-2016\\ \text{No.}& & \left(\text{Rs}\right)& \left(\text{Rs}\right)\\ 1& \text{Reserves and Surplus:}& & \\ & \text{Balance in Profit and Loss}& 1,25,000& 50,000\\ & \text{General Reserve}& 50,000& -\\ 2& \text{Long-term Borrowings :}& & \\ & 10\%\text{Debentures}& 2,25,000& 50,000\\ 3& \text{Short-term Borrowings}:& & \\ & \text{Bank Overdraft}& 75,000& 37,500\\ 4& \text{Short-term Provisions}:& & \\ & \text{Proposed Dividend}& 1,00,000& 62,500\\ 5& \text{Tangible Assets:}& & \\ & \text{Machinery}& 9,12,500& 5,22,500\\ & (-)\text{Accumulated Depreciation}& (1,05,000)& (70,000)\\ & & 8,07,500& 4,52,500\\ 6& \text{Intangible Assets:}& & \\ & \text{Goodwill}& 50,000& 75,000\\ 7& \text{Inventories:}& & \\ & \text{Stock in Trade}& 61,000& 36,000\end{array}$

Additional Information:

(i) During the year a piece of Machinery Costing Rs 80,000 on which accumulated depreciation was Rs 55,000 was sold for Rs 15,000.

Answer 1

CASH FLOW STATEMENT

for the year ended 31st March, 2017

$\begin{array}{ccc}\text{Particulars}& \text{Amount}& \text{Amount}\\ & \left(\text{Rs}\right)& \left(\text{Rs}\right)\\ \text{A. Cash Flow from Operating Activities}& & \\ \text{Profit before Tax (Note 1)}& 2,25,000& \\ \text{Adjustments related to non-cash and non-operating items}& & \\ \text{Goodwill written off}& 25,000& \\ \text{Debenture interest (Assume debentures issued on 01-04-2016)}& 22,500& \\ \text{Depreciation}& 90,000& \\ \text{Loss on sale of machinery}& 10,000& \\ \text{Operating Profit before working capital changes}& 3,72,500& \\ Less:\text{Increase in Inventories}& (25,000)& \\ \text{Cash Generated from Operating Activities}& 3,47,500& \\ (-)\text{Tax Paid}& \text{Nil}& \\ \text{Net Cash from Operating Activities}& & 3,47,500\\ \text{B. Cash Flow from Investing Activities}& & \\ \text{Sale of Machinery}& 15,000& \\ \text{Purchase of Machinery}& (4,70,000)& \\ \text{Purchase of non-current investment}& (1,00,000)& \\ \text{Net Cash used in Investing Activities}& & (5,55,000)\\ \text{C.}\text{Cash Flow from Financing Activities}& & \\ \text{Processed from issue of share capital}& 75,000& \\ \text{Increase in bank overdraft}& 37,500& \\ \text{Processed from issue of debentures}& 1,75,000& \\ \text{Proposed dividend paid}& (62,500)& \\ \text{Interest on debentures paid}& (22,500)& \\ \text{Net Cash from Financing Activities}& & 2,02,500\\ \text{Net decrease in Cash and Cash Equivalents (A + B + C)}& & (5,000)\\ +\text{Cash and Cash Equivalents at the beginning (26,500 + 35,000)}& & 61,500\\ \text{Cash and Cash Equivalent at the end (36,500 + 20,000)}& & 56,500\end{array}$

Working Note :

$\text{1. Profit for the year}=75000\text{+ Proposed divident(C.Y)}=1,00,000\text{+ Transfer to Reserve}=\underset{–}{50,000}=\underset{–}{2,25,000}$

$DrMACHINERYACCOUNTCr$

$\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \left(\text{Rs}\right)& & \left(\text{Rs}\right)\\ \text{To Balance b/d}& 5,22,500& \text{By Bank A/c (Sales)}& 15,000\\ \text{To Bank A/c (Purchase)}& 4,70,000& \text{By Accumulated Depreciation A/c}& 55,000\\ & & \text{By Profit and Loss A/c (Loss on sale)}& 10,000\\ & & \text{By Balance c/d}& 9,92,500\\ \text{Total}& 9,92,500& \text{Total}& 9,92,500\end{array}$

$DrACCUMULATEDDEPRECIATIONACCOUNTCr$

$\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \left(\text{Rs}\right)& & \left(\text{Rs}\right)\\ \text{To Machinery A/C}& 55,000& \text{By Balance b/d}& 70,000\\ \text{To Balance c/d}& 1,05,000& \text{By Profit and Loss A/c (Depreciation)}& 90,000\\ & & \text{charged during the year}& \\ \text{Total}& 1,60,000& \text{Total}& 1,60,000\end{array}$