The Tabuan Jaya Berhad has prepared the data as per above. In December 2020, Tabuan Jaya Berhad paid RM54 million cash for the new building acquired to accommodate an expansion of operations. This was financed partly by a new issue of long term debt for RM40 million. During 2020, the company also sold fixed asset for RM5.0 million cash, which was equal to their book value. All sales and purchases of merchandise were on credit. As the net income of RM4 million was the highest in the company’s history, Mr Bakri, the chairman of the board, was perplexed by the company’s extremely low cash balance. Question: What information can be obtained from a cash flow statement? What the main components of a cash flow statement? Prepare a statement of cash flows, ignore tax. Use the indirect method for reporting cash flows from operating activities. What is revealed by the statement of cash flows? Does it help you to reduce Mr Bakri’s puzzlement? Why?
Given the Financial Statements of Tabuan Jaya Berhad Berhad for the year 2019 and 2020.
Income Statement for the year ended 31 December 2020
|
RM (mil.) |
RM (mil.) |
Sales |
|
100 |
Less cost of goods sold |
|
|
Opening inventory |
15 |
|
Purchases |
104 |
|
Goods available for sales |
119 |
|
Closing inventory |
46 |
(73) |
Gross profit |
|
27 |
Less other expenses |
|
|
General expenses |
8 |
|
|
8 |
|
Property taxes |
4 |
|
Interest expenses |
3 |
23 |
Net income |
|
4 |
|
|
7 |
Total |
|
11 |
Dividend |
|
(1) |
Retained earnings, Dec 31, 2020 |
|
10 |
|
RM (mil.) |
RM (mil.) |
RM (mil.) |
|
2020 |
2019 |
Increase/ Decrease |
Assets |
|
|
|
Cash |
1 |
20 |
(19) |
|
20 |
5 |
15 |
Inventory |
46 |
15 |
31 |
Prepaid general expenses |
4 |
2 |
2 |
Fixed assets |
91 |
50 |
41 |
|
163 |
92 |
70 |
Equities & Liabilities |
|
|
|
Accounts payable |
39 |
14 |
25 |
Accrued property tax payable |
3 |
1 |
2 |
Long-term debt |
40 |
0 |
40 |
Share capital |
70 |
70 |
0 |
Retained earnings |
10 |
7 |
3 |
|
162 |
92 |
70 |
The Tabuan Jaya Berhad has prepared the data as per above. In December 2020, Tabuan Jaya Berhad paid RM54 million cash for the new building acquired to accommodate an expansion of operations. This was financed partly by a new issue of long term debt for RM40 million. During 2020, the company also sold fixed asset for RM5.0 million cash, which was equal to their book value. All sales and purchases of merchandise were on credit.
As the net income of RM4 million was the highest in the company’s history, Mr Bakri, the chairman of the board, was perplexed by the company’s extremely low cash balance.
Question:
- What information can be obtained from a cash flow statement? What the main components of a cash flow statement?
- Prepare a statement of
cash flows , ignore tax. Use the indirect method for reporting cash flows from operating activities. - What is revealed by the statement of cash flows? Does it help you to reduce Mr Bakri’s puzzlement? Why?
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