EL Dragon Pty (Ltd) (EL) is an unlisted company that sells cycling equipment throughout South Africa. The company was started by Miguel Garza after he struggled to find good replacement parts for his cycling equipment. EL Dragon’s financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The financial manager, Ms Jessy is busy preparing the Cash Flow Statement for the year ended 28 February 2020. She does not understand why the Cash Flow Statement, unlike the other annual financial statements, is prepared on the cash basis. She has approached you to assist her with a few matters.
The following extract of the trial balance was obtained from the accounting software package for 2020 and 2019.
|
EL Dragon (Pty) Ltd Trial balance extract for the years ended 28 February |
2020 R’ Debit/ (Credit) |
2019 R’ Debit/ (Credit) |
|
|
Retained earnings |
4,5 |
(7 210 000) |
(7 340 000) |
|
Share Capital |
4,5 |
(5 000 000) |
(3 000 000) |
|
Revaluation Surplus |
(2 000 000) |
(550 000) |
|
|
Debentures |
3 |
? |
? |
|
Inventory |
345 000 |
105 000 |
|
|
Trade Receivables |
1,2 |
2600 000 |
2150 000 |
|
Trade payables |
(113 000) |
(102 000) |
|
|
Income received in advance |
(110 000) |
(80 000) |
|
|
Prepaid expenses |
23 000 |
17 100 |
|
|
Shareholders for dividends |
5 |
(120 000) |
(76 000) |
|
Dividends withholding tax payable |
5 |
(24 000) |
(15200) |
|
SARS receivable/(payable) |
11 000 |
(7 000) |
Additional information:
- The following information, among others, was obtained from the statement of comprehensive income of EL Dragon for the year ended 28 February:
|
2020 R’ |
2019 R’ |
|
|
Sales |
1 290 000 |
1 090 000 |
|
Cost of sales |
750 000 |
623 000 |
|
Other operating expenses |
220 000 |
245 000 |
|
Interest income |
15 000 |
9200 |
|
Profit before tax |
366 000 |
237 000 |
|
Profit after tax |
243 000 |
210 000 |
Included in operating expenses are credit losses related to Ms Veronica. Ms Veronica, a long outstanding debtor was declared insolvent during the current accounting period. R7 500 was received from her estate on 1 November 2019 and this represents 30% of the balance owing by Ms Veronica.
Other operating expenses do not include any depreciation, amortisation or profit or loss from disposal of assets.
- Trade receivables are presented net of allowance for credit losses of R13 000 (2019: R9 000).
- EL issued 3 000 10% debentures of R150 at a premium of 6% on 1 March 2019. Coupon payments are made half yearly on 30 August and 28 February each year. The debentures will be redeemed on 28 February 2024, at par.
- EL declared a capitalisation issue of 50 000 shares during the current period. EL plans to acquire additional land and buildings in the next accounting period, 100 000 shares were issued to existing shareholders for cash to raise the required funds.
- EL declared an interim dividend on 30 August 2019. The total dividend payments for the year amounted to R100 000.
- Interest and dividend cash flows are classified as operating activities.
You are required to:
Prepare only the following sections of the Statement of Cash flows of El Dragon (Pty)Ltd for the year ended 28 February 2020 on the direct method:
|
a. Cash flows from operating activities |
29 marks |
|
b. Cash flows from financing activities |
10 Marks |
|
Presentation marks |
1 mark |
|
Total |
40 marks |
Comparative figures are not required.
Show all calculations clearly.
Round off all calculations to 2 decimal places.
Ignore VAT the requirement is the cash flow from operating activities and cash flow from financing activities please ignore the first question and get i get help with this one as quick as possible.,
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