.4 Explain why depreciation is added to the operating profit. Comment on the following cash flows of Mustang Limited: Cash flows from operating activities R292 000 .5 .5.1 .5.2 Increase in receivables (R76 000)
.4 Explain why depreciation is added to the operating profit. Comment on the following cash flows of Mustang Limited: Cash flows from operating activities R292 000 .5 .5.1 .5.2 Increase in receivables (R76 000)
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter11: The Statement Of Cash Flows
Section: Chapter Questions
Problem 16CE
Related questions
Question
Good day
Please answer question 1.4., 1.5.1 and 1.5.2
![Study the statement of cash flows of Mustang Limited given below and answer the following questions:
1.1
Calculate the cash balance as at the beginning of the year and state whether the balance is
favourable or unfavourable.
1.2
Calculate the amount of interest paid for the year ended 31 December 2020.
1.3
Identify one item from the statement of cash flows below that increases cash flow but not profit.
1.4
Explain why depreciation is added to the operating profit.
1.5
Comment on the following cash flows of Mustang Limited:
Cash flows from operating activities R292 000
1.5.1
1.5.2
Increase in receivables (R76 000)
1.5.3
Cash flows from investing activities (R448 000)
1.5.4
Cash flows from financing activities (R160 000)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fabf30394-9f0e-411a-b758-967473a511be%2F00b736de-7310-49c9-9c0f-70962ad712ee%2F1kfiht5_processed.png&w=3840&q=75)
Transcribed Image Text:Study the statement of cash flows of Mustang Limited given below and answer the following questions:
1.1
Calculate the cash balance as at the beginning of the year and state whether the balance is
favourable or unfavourable.
1.2
Calculate the amount of interest paid for the year ended 31 December 2020.
1.3
Identify one item from the statement of cash flows below that increases cash flow but not profit.
1.4
Explain why depreciation is added to the operating profit.
1.5
Comment on the following cash flows of Mustang Limited:
Cash flows from operating activities R292 000
1.5.1
1.5.2
Increase in receivables (R76 000)
1.5.3
Cash flows from investing activities (R448 000)
1.5.4
Cash flows from financing activities (R160 000)
![MUSTANG LIMITED
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020
R
Cash flows from operating activities
292 000
Profit before interest and tax/Oparating profit
512 000
Depreciation
128 000
640 000
Profit before working capital changes
Working capital changes
(100 000)
8 000
Decrease in inventory
Increase in receivables
(76 000)
Decrease in payables
(32 000)
Cash generated from operations
540 000
Interest paid
Dividends paid
(120 000)
Income tax paid
(96 000)
Cash flows from investing activities
(448 000)
(328 000)
Non-current assets purchased
Increase in investments
(120 000)
Cash flows from financing activities
160 000
Increase in long-term borrowings
160 000
Net increase in cash and cash equivalents
4 000
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
36 000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fabf30394-9f0e-411a-b758-967473a511be%2F00b736de-7310-49c9-9c0f-70962ad712ee%2Frdmo88x_processed.png&w=3840&q=75)
Transcribed Image Text:MUSTANG LIMITED
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020
R
Cash flows from operating activities
292 000
Profit before interest and tax/Oparating profit
512 000
Depreciation
128 000
640 000
Profit before working capital changes
Working capital changes
(100 000)
8 000
Decrease in inventory
Increase in receivables
(76 000)
Decrease in payables
(32 000)
Cash generated from operations
540 000
Interest paid
Dividends paid
(120 000)
Income tax paid
(96 000)
Cash flows from investing activities
(448 000)
(328 000)
Non-current assets purchased
Increase in investments
(120 000)
Cash flows from financing activities
160 000
Increase in long-term borrowings
160 000
Net increase in cash and cash equivalents
4 000
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
36 000
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