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The following are the Balance Sheets of Doyle plc as at 31/12/2013 and 31/12/2012 together with an abridged Profit and Loss Account for the year ended 31/12/2013 - Leaving Cert Accounting - Question 2 - 2014
Question 2
The following are the Balance Sheets of Doyle plc as at 31/12/2013 and 31/12/2012 together with an abridged Profit and Loss Account for the year ended 31/12/2013. *... show full transcript
Worked Solution & Example Answer:The following are the Balance Sheets of Doyle plc as at 31/12/2013 and 31/12/2012 together with an abridged Profit and Loss Account for the year ended 31/12/2013 - Leaving Cert Accounting - Question 2 - 2014
Step 1
Prepare a Cash Flow Statement of Doyle plc for the year ended 31/12/2013 including Reconciliation Statement(s).
Answer
Cash Flow Statement of Doyle plc for the year ended 31/12/2013
Operating Activities
Net cash inflow from operating activities:
- Operating Profit: €185,000
- Depreciation charge for the year: €60,000
- Loss on sale of machinery: €(25,000)
- Increase in stock: €(23,000)
- Increase in debtors: €(5,000)
- Increase in creditors: €5,600
Net cash inflow from operating activities: €244,600
Cash Flow from Investing Activities
- Payments to acquire tangible fixed assets: €(20,000)
- Purchase of Government Securities: €(20,000)
- Receipt from sale of assets: €30,000
Net cash used in investing activities: €(10,000)
Cash Flow from Financing Activities
- Repayment of debentures: €(80,000)
- Receipt from issue of shares: €20,000
- Receipt from share premium: €(56,000)
Net cash used in financing activities: €(116,000)
Net Decrease in Cash
- Decrease in cash during the period: €(10,400)
- Cash used to purchase Government Securities: €20,000
- Cash used to purchase debentures: €(8,000)
- Change in net debt: €232,000
- Net debt 01/01/2013: €(142,000)
- Net debt 31/12/2013: €(152,400)
Reconciliation of Net Cash Flow to Movement in Net Debt
- Cash at bank at the beginning of the year: €(142,000)
- Net decrease in cash: €(10,400)
- Net debt at 31/12/2013: €(152,400)
Step 2
Explain the reasons why Doyle plc, who has an operating profit of €185,000, has generated a greater net cash inflow during the year.
Answer
Doyle plc has generated €59,000 (€244,000 - €185,000) more cash inflow due to the following reasons:
- The depreciation expense of €60,000 and loss on sale of machinery reduced cash outflow without affecting cash flow positively.
- An increase in creditors increased cash inflow by €5,000, as it indicated that it has delayed payments to creditors.
- Additionally, the reduction in stock by €23,000 contributed positively to the cash flows from operating activities, allowing more cash availability.
- Lastly, the effective management of working capital facilitated better liquidity and cash flow management.
Step 3
List three accounting obligations of a large public company under the Companies Act.
Answer
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Provide a full set of accounts, a balance sheet, and a cash flow statement to shareholders at the Annual General Meeting (AGM).
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File/register a full set of accounts and balance sheet with the registrar of companies within the stipulated timeframe.
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Produce an annual report that includes a director's report and an auditor's report to the shareholders at the AGM, ensuring transparency and integrity in reporting.