Accounting Business Reporting for Decision Making

304 Accounting: Business Reporting for Decision Making

Harvey Ltd

Balance sheets as at 31 December 2016 and 2017

2017

$’000

2016

$’000

Current assets

Cash at bank

Accounts receivable

Inventory

Prepaid expenses

8

46

32

12

12

43

25

6

Total current assets 98 86

Non-current assets

Land and buildings

Plant and machinery (net)

240

370

110

250

Total non-current assets 610 360

Total assets 708 446

Current liabilities

Accounts payable

Income tax payable

Accrued expenses

68

20

21

67

28

28

Total current liabilities 109 123

Non-current liabilities

Loan 350 150

Total liabilities 459 273

Equity

Paid-up ordinary capital

Retained earnings

200

49

150

23

Total equity 249 173

Total liabilities and equity 708 446

Additional information

• There were no disposals of property, plant or equipment throughout the year.


• An existing long-term loan of $50 000 was paid out.


• A share issue of $50 000 was made to help finance planned expansions.


• A long-term loan of $250 000 was taken up.


• A dividend of $20 000 was paid.

SOLUTION TO 7.2

Step 1: Determine the cash flows from operating activities

Step 1a: Calculate the receipts from customers

Cash from customers=Opening accounts

receivable

+Sales −Closing accounts

receivable

= $43 +$368− $46

= $365

Step 1b: Calculate payments to suppliers and employees

Cash paid to

suppliers

=Opening accounts

payable

+ Purchases − Closing accounts

payable

= $67 + $264 − $68

= $263