Problem
Understanding cash flows and preparing cash flow statements.
The statements of financial position for 2022 and 2021 for Bextrood Ltd and extracts from the statement of financial performance for 2022 for Bextrood Ltd are presented below:
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Bextrood Ltd
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Statements of financial position at 31 December
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2022
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2021
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ASSETS
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£
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£
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Non-current assets
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Plant property and equipment at cost
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800,000
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750,000
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Less: Accumulated depreciation
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(226,000)
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(200,000)
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Property plant and equipment at net book value
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574,000
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550,000
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Current assets
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Inventory
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900,000
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820,000
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Receivables
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960,000
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950,000
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Prepayments
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2,400
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1,800
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Cash and cash equivalents
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0
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13,600
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Total current assets
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1,862,400
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1,785,400
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Total assets
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Total2,436,400
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Total2,335,400
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EQUITY AND LIABILITIES
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Share capital and reserves
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Ordinary shares (nominal value per share = £1.00)
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800,000
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800,000
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Ordinary share premium
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80,000
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80,000
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Retained earnings
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229,000
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75,000
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Total equity and reserves
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1,109,000
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955,000
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Liabilities
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Non-current liabilities: debentures
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450,000
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500,000
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Current liabilities
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Bank overdraft
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115,200
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0
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Payables
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725,000
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850,000
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Accruals
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6,000
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12,200
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Corporation tax payable
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31,200
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18,200
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Total current liabilities
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877,400
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880,400
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Total liabilities
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1,327,400
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1,380,400
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Total equity and liabilities
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Total2,436,400
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Total2,335,400
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Bextrood Ltd
Extract of the Statement of financial performance for the year ended 31 December 2022
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£
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Profit before interest and taxation
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243,200
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Finance costs
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(34,000)
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Profit before taxation
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209,200
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Taxation
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(31,200)
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Profit for the year
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Total178,000
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The following notes are relevant.
a) During the year, items of property, plant and equipment were sold. The original cost of these items was £55,000, and the accumulated depreciation on the date of disposal was £22,800. The sale proceeds were £25,000.
b) An interim dividend of 3p per share had been paid on 30 June 2022.
Task
1) Prepare the reconciliation of profit before tax to net cash flow generated from (or used in) operating activities for Bextrood Ltd for the year ended 31 December 2022, using the indirect method.
2) Prepare the cash flow statement for Bextrood Ltd for the year ended 31 December 2022 (in accordance with IAS 7) using the indirect method.
3) Comment on the overall cash position of the company and the operating, investing and financing activities of Bextrood Ltd as presented in the cash flow statement