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June 2006 Accounting Examiners Case Solution Paper

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June 2006 Examiner's Solution
C a s e S o l u t i o n 1
1. Prepare a Cash Flow Statement for the year to 31 May 2006 based on the draft Accounts in Appendix 1.
(17 marks)
Cash Flow Statement Year to 31 May 2006
£'000
Net cash flow from operating activities
(see note 1)
942
Taxation
(Liability at 31.5.05)
255
Capital expenditure
Payments for fixed assets
(see note 2)
1 537
Sales of fixed assets
40
1 497
Equity dividends paid to shareholders
(2005 and 2006)
300
Financing
Repayment of long-term loans
(see note 3)
350
Issue of share capital
(see note 4)
1 300
950

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Decrease in Cash
(see note 5)
160
Note 1:
Profit before taxation
1 310
Add back:
Depreciation
289
1 599
Adjustments to working capital
2006
2005
£'000
£'000
Increase in inventories
650
645
5
Increase in debtors
942
600
342
Decrease in trade creditors
100
410
310
657
Net cash flow from operating activities
942
Note 2:
Property
Plant
Motor Vehs
Total
£'000
£'000
£'000
Net book value at 31.5.06
500
985
300
Net Book value at 31.5.05
300
222
55
Change in NBV
200
763
245
Sales of assets
40
Depreciation
224
65
Therefore, purchases of assets =
200
1 027
310
1 537

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June 2006 Examiner's Solution Case Solution 1 1. Prepare a Cash Flow Statement for the year to 31 May 2006 based on the draft Accounts in Appendix 1. (17 marks) Cash Flow Statement – Year to 31 May 2006 £'000 Net cash flow from operating activities Taxation (see note 1) 942 (Liability at 31.5.05) –255 Capital expenditure Payments for fixed assets (see note 2) Sales of fixed assets –1 537 40 –1 497 Equity dividends paid to shareholders (2005 and 2006) –300 Financing Repayment of long-term loans (see note 3) –350 Issue of share capital (see note 4) 1 300 950 Decrease in Cash (see note 5) –160 Note 1: Profit before taxation Add back: 1 310 Depreciation 289 1 599 Adjustments to working capital 2006 2005 £'000 £'000 Increase in inventories 650 645 –5 Increase in debtors 942 600 –342 Decrease in trade creditors 100 410 –310 –657 Net cash flow from operating activities Note 2: 942 Property Plant Motor Vehs £'000 £'000 £'000 Net book value at 31.5.06 500 985 300 Net Book value at 31.5.05 300 222 55 Change in NBV 200 763 245 Sales of assets 40 Depreciation Therefore, purchases of assets = Total 200 224 65 1 027 310 1 537 Note 3: £'000 Long-term creditors at 31.5.06 150 Long-term creditors at 31.5.05 500 Repayment of loans –350 Note 4: £'000 Share capital at 31.5.06 Share premium at 31.5.06 Share capital at 31.5.05 New shares subscribed 500 1 000 –200 1 300 New share ...
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