WORKSHEET- 5 ON CASH FLOW STATEMENT

Q) 1. From the following particulars, calculate Cash from Investing Activities:

Particulars Opening Balance (Rs) Closing Balance (Rs)

Plant & Machinery (at cost) 3,00,000 3,20,000

Accumulated Depreciation 90,000 1,00,000

Patents 2,60,000 1,40,000

Goodwill 80,000 1,00,000

Additional Information:

During the year:

(i) Depreciation charged on Plant and Machinery Rs. 36,000.

(ii) A machine having a book value of Rs. 20,000 was sold for Rs. 16,000.
(iii) Patents having a book value of Rs. 80,000 were sold for Rs. 1, 10,000.

Solution:

CASH FLOW FROM INVESTING ACTIVITIES

Particulars Rs.
Sale of Machinery 16,000
Purchase of Machinery (66,000)
Sale of Patents 1,10,000
Purchase of Goodwill (20,000)
Net Cash Flow from Investing Activities 40,000

Working Notes:
 PATENTS A/C
Particulars Amount Particulars Amount
To Balance b/d 2,60,000 By Bank a/c 1,10,000
To Profit on Sale 30,000 By Statement of P& L 40,000
By Balance c/d 1,40,000
2,90,000 2,90,000

Accumulated Depreciation A/C

Particulars Amount Particulars Amount
To P/M a/c 26,000 By balance b/d 90,000
(Balancing Figure)
To balance c/d 1,00,000 By Depreciation a/c 36,000
1,26,000 1,26,000

Plant & Machinery A/C

Particulars Amount Particulars Amount
To balance b/d 3,00,000 By Bank a/c 16,000
To Bank a/c 66,000 By Acc. Dep. a/c 26,000
(Balancing Figure)
By Loss on Sale of Machinery 4,000
By Balance c/d 3,20,000
3,66,000 3,66,000

CASH FLOWS FROM FINANCING ACTIVITIES

Q2). From the following activities, calculate cash flows from Financing Activities:
 Particulars 31.3.2018 31.3.2017
Equity Share Capital 8,00,000 6,00,000
12% Preference Share Capital ----------------- 2,00,000
14% Debentures 1,00,000 ------------

Additional Information:
(i) Equity Shares were issued at a premium of 15%.
(ii) 12% Preference Shares were redeemed at a premium of 5%.
(iii) 14% Debentures were issued at a discount of 1%.
(iv) Dividend paid on old Preference Shares Rs. 24,000.
(v) Interest paid on Debentures Rs. 14,000
(vi) Underwriting Commission of Equity Shares Rs. 10,000.
(vii) Proposed Dividend on Equity Shares for the year ended 31.3.2018 Rs. 1, 20,000.
(viii) Proposed Dividend on Equity Shares for the year ended 31.3.2017 Rs. 90,000.

Solution:
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of Equity Share Capital (2,00,000 + 30,000 -10,000) 2,20,000
Redemption of Preference Shares (Rs. 2,00,000 + Rs. 10,000) (2,10,000)
Proceeds from Issue of Debentures (Rs. 1,00,000 – Rs. 1,000) 99,000
Proposed Dividend (90,000)
Dividend paid on Preference Shares (24,000)
Interest paid on Debentures (14,000)
Net Cash used in Financing Activities (19,000)

Q3). From the following extracts taken from the Balance Sheet of M/s K Ltd. On 31 st March
and the additional information provided, you are required to calculate:

(i) Cash Flows from Operating Activities.

 (ii) Cash Flows from Financing Activities.

Particulars 31.3.2015 31.3.2016

Equity Share Capital 20,00,000 30,00,000
10% Preference Share Capital 2,00,000 1,00,000
Securities Premium Reserve a/c -------------- 95,000
Profit & Loss Balance 4,00,000 8,00,000
10% Debentures 10,00,000 10,00,000

Additional Information:
1. Fresh equity shares were issued on 31st March 2016 at a premium of 10%.
2. Interim Dividend was paid on equity shares @8%.
3. Preference shares were redeemed on 31st March, 2016 at premium of 5%. Premium
on redemption was charged against premium received on issue of fresh equity
shares.

Solution:
K Ltd.

CASH FLOW STATEMENT for the year ended 31.3.2016

Particulars Rs. Rs.

A. Cash Flows from Operating Activities:

Net Profit before Tax ( Note 1) 5,80,000

Adjustments for non-cash and non-operating items:
Add: Interest on Debentures 1,00,000
Operating Profit before Working Capital changes 6,80,000
Net Cash from operating activities 6,80,000
6,80,000

Cash flows from Financing Activities: 11,00,000

Cash Proceeds from Equity Shares (Rs. 10,00,000 + Rs.1,00,000) (1,05,000)
Cash paid for Redemption of Preference Shares (Rs. 1,00,000 +5,000) (20,000)
Dividend Paid on Preference Shares (1,60,000)
Dividend Paid on Equity Shares (1,00,000)
Interest on Debentures 7,15,000
Net Cash flows from financing activities 7,15,000

Notes:
Calculation of Net Profit before Tax:
Profit & Loss Balance on 31st March, 2016 8,00,000
Less: Profit & Loss Balance on 31st March, 2015 4,00,000
4,00,000
Add: Dividend Paid on Preference Shares (10% on Rs. 2,00,000) 20,000
Dividend Paid on Equity Shares (8% on Rs. 20,00,000) 1,60,000
Net Profit before Tax 5,80,000

PBITD
Less: Interest
PBT (This is our Destination) 5,80,000
Less: Tax NIL
PAT 5,80,000
Less: Preference Dividend 20,000
Profit available to Equity Dividend – (Equity Dividend; Interim Dividend; Proposed
Shareholders Dividend) = 1,60,000
+ Balance of Statement of P/L = Rs. 4,00,000

Dividend on Preference Shares is paid before payment of dividend on Equity Shares. The
Company has paid Interim Dividend on Equity Shares. Hence, it must have paid dividend on
Preference Shares.
This entry is not there at the time of Issue of Redeemable Preference Shares

Loss on Issue of Preference Shares a/c………………..Dr X XXXXXXX

To Premium on Redemption of Preference Shares XXXXXXX

Only this entry is recorded at the time of Redemption of Redeemable Preference Shares

10% Redeemable Preference Share Capital a/c…………………Dr 1,00,000

Premium on Redemption of Preference Shares a/c……….Dr 5,000
To Preference Shareholders a/c 1,05,000

Preference Shareholders a/c………………….Dr 1,05,000

To Bank a/c 1,05,000
SPR a/c…………………..Dr 5,000
To Premium on Redemption of Preference shares 5,000