CLASS: XII
Subject: ACCOUNT
Cash Flow Statement as per AS-3 indirect method from the following Summarised information
Q.1 Prepare a Cash Flow Statement as per AS-3 indire
of ABC Ltd.
Liabilities Details
31.03.08 31.03.09 Assets Details
31.03.08 31.03.09
3,00,000
75,000
50,000
1,20,000
1,50,000
40,000
5,000
Equity Share Capital
9% Preference Share
Capital
General Reserve
Securities Premium
Profit and Loss
Statement Balance
10% Debentures
10% Loan
12% Fixed Deposits
Creditors
Commission received
in advance
Bank Overdraft
Cash Credit
Provision for Tax
Proposed Dividend
Provision for Doubtful
Debts
23.000
20,000
1,00,000
40,000
30,000
3,50,000 Goodwill
Patents
2,00,000 Machinery
70,000 Building
15,000 Furniture
Investments
54,000 Stock
3,70,000 Debtors
50,000 Bills Receivable
60,000 Accrued Incomes
50,000 Marketable Securities
Prepaid Expenses
2,000 Treasury Bills
14,000 Commercial Papers
19,000 Fixed Deposit with
50,000 Bank (3 months)
50,000 Cash in hand
Cash at Yes Bank
5,000 Preliminary Expenses
Underwriting Share
Issue and Commission
Discount on issue of
Debentures
47,000
1,40,000
77,000
1,00,000
25,000
6.000
33,000
10,000
35,000
30.000
50,000
75,000
90,000
3,00,000
1,00,000
1,20,000
1,59,000
1.45,000
37,000
7,000
30,000
8,000
40,000
35.000
3.000
19,000
21,000
38,000
42.000
40,000
9.500
30,000
5.500
60,000
10,500
67,000
3,500
4.000
2,000
7.000
15,000
8,35,000
13,59,000
8,35,000
13,59,000
Additional Information:
(a) Debentures are issued at the beginning of the year and loan repaid at the end of the year. The
Equity Shares are issued at par.
(b) Interest on Investments received Rs. 13,000.
(c) Depreciation on furniture Rs. 7,000 and on machinery Rs. 10,000.
(d) Dividend paid Rs. 45,000 and Tax provided for in the Income Statement Rs. 48,000.
Answers
Cash Flow Statements
Contents
OBJECTIVE
SCOPE Paragraphs 1-2
BENEFITS OF CASH FLOW INFORMATION 3-4
DEFINITIONS 5-7
Cash and Cash Equivalents 6-7
PRESENTATION OF A CASH FLOW STATEMENT 8-17
Operating Activities 11-14
Investing Activities 15-16
Financing Activities 17
REPORTING CASH FLOWS FROM OPERATING
ACTIVITIES 18-20
REPORTING CASH FLOWS FROM INVESTING AND
FINANCING ACTIVITIES 2 1
REPORTING CASH FLOWS ON A NET BASIS 22-24
FOREIGN CURRENCY CASH FLOWS 25-27
EXTRAORDINARY ITEMS 28-29
INTEREST AND DIVIDENDS 30-33
TAXES ON INCOME 34-35
INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND
JOINT VENTURES 3 6
ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
AND OTHER BUSINESS UNITS 37-39
NON-CASH TRANSACTIONS 40-41
COMPONENTS OF CASH AND CASH EQUIVALENTS 42-44
OTHER DISCLOSURES 45-48
ILLUSTRATIONS
Answer:
Comprehensive Problem 1.
Mansfield Corporation (external funds requirement) (LO4) Mansfield Corporation had 2010 sales of $100 million. The balance sheet items that vary directly with sales and the profit margin are as follows:
Percent
Cash
5%
Accounts receivable
15
Inventory
20
Net fixed assets
40
Accounts payable
15
Accruals
10
Profit margin after taxes
10%
The dividend payout rate is 50 percent of earnings, and the balance in retained earnings at the end of 2010 was $33 million. Notes payable are currently $7 million. Long-term bonds and common stock are constant at $5 million and $10 million, respectively.
a. How much additional external capital will be required for next year if sales increase 15 percent? (Assume that the company is already operating at full capacity.)
b. What will happen to external fund requirements if Mansfield Corporation reduces the payout ratio, grows at a slower rate, or suffers a decline in its profit margin? Discuss each of these separately.
c. Prepare a pro forma balance sheet for 2011 assuming that any external funds being acquired will be in the form of notes payable. Disregard the information in part b in answering this question (that is, use the original information and part a in constructing your pro forma balance sheet).