286 Accounting: Business Reporting for Decision Making
Coconut Plantations Pty Ltd
Statement of changes in retained profits for year ended 31 December 2017
Contributed equity
Initial issue of shares $ 200 000Retained earnings
Balance 1 January 2017
Profit for the year ended to 31 December 2017
Less: Dividend for the year90 210
229 600
130 000Retained earnings at 31 December 2017 $ 189 810(continued)
Coconut Plantations Pty Ltd
Balance sheet as at 31 December 2017
Current assets
Cash on hand
Accounts receivable
Inventories (finished goods
and raw materials)
Prepayments167 200
93 010175 000
4 500 439 710
Non-current assets
Building and manufacturing equipment
Less: Accumulated depreciation360 000
25 500 334 500
Office equipment
Less: Accumulated depreciation40 000
15 000 25 000
Total assets 799 210
Current liabilities
Accounts payable
Accrued expenses
Dividend payable
Income tax payable42 500
7 500
130 000
98 400 278 400
Non-current liabilities
Bank loan due — 2030 131 000
Total liabilities 409 400
Net assets $ 389 810
Shareholders’ equity
Share capital
Retained earnings200 000
189 810
Total equity $ 389 810Coconut Plantations Pty Ltd
Balance sheet as at 31 December 2016
Current assets
Cash on hand
Accounts receivable
Inventories (finished goods
and raw materials)
Prepayments60 390
23 11060 000
1 000 144 500
Non-current assets
Building
Less: Accumulated depreciation200 000
500 199 500
Equipment
Less: Accumulated depreciation40 000
10 000 30 000
Total assets 374 000
Current liabilities
Accounts payable
Accrued expenses
Dividend payable
Income tax payable3 300
700
14 790
45 000 63 790
Non-current liabilities
Bank loan — due 2022 20 000
Total liabilities 83 790
Net assets $ 290 210
Shareholders’ equity
Share capital
Retained earnings200 000
90 210
Total equity $ 290 210Note that, in addition to the above, the notes from the financial statements reveal that extensions
were made to the manufacturing facility that cost $100 000, and new manufacturing equipment was
acquired at a cost of $60 000. There were no disposals of property, plant or machinery. There were
no new issues of shares. A new loan of $140 000 was taken out and the existing loan of $20 000 was
repaid. Retained earnings increased from $90 210 to $189 810 as a result of profit of $229 600 less divi-
dends of $130 000.
To complete the statement of cash flows using the direct method and the reconciliation using the
indirect method it is necessary to work through each classification activity (operating, financing and
investing).