Reference no: EM131032870

PART A:

1. What is the purpose of a statement of cash flows and how might such a statement be used by investors and other users of financial reports?

2. Explain why the cash position for a firmfrom one reporting period to the next may show a marked improvement according to the statement of cash flows but the statement of profit or loss for the same period shows a significant decline in reported profit.

PART B:

Unicorn Ltd, a manufacturing company, commenced operations on 1 July2014by issuing 308200 $5.00 shares, payable in full on application on a first-come, first-served basis. By 15August2014 the shares were fully subscribed and duly allotted.There were no share issue costs.

For theyear ending 30 June 2016, the company recorded the following aggregate transactions:

	$
Sales	5 756 000
Interest income	6 000
Cost of Sales	4287 000
Sundry income	13 000
Employee benefit expenses - Admin	144 000
Depreciation expense- Admin	42 000
Distribution Expenses	86 000
Insurance expense	37 000
Rental expenses - office	23 000
Sales and marketing	820 000
Doubtful debts expense	6 000
Interest expense	44 000
Other borrowing expenses	4 000
Income tax expense	85 000

The following additional information was noted during the preparation of financial statements for the year ended 30 June 2016:

(a) There were no share issues during the year ended 30 June 2015.

(b) On 1 July 2015 30 000 fully paid shares were issued for $150 000.

(c) Adividend of $150 000 was declared and paid during the 2016 financial year and a final dividend for 2016 of $101 460 was proposed but not recognised in the financial statements.

(d) The balances of the land revaluation reserve and the investments revaluation reserve at 30 June 2015 were $15 000 credit and $35 000 credit respectively.

(e) The following revaluations were recognised during the year ended 30 June 2016: land revalued upward by $50 000 (related income tax $15 000) by Valuations RUS Pty Ltd and available-for-sale investments were revalued upward by $10 000 (related income tax $3000).

(f) The available-for-sale investments are held as part of a long-term investment strategy.

(g) $40 000 of bank loans is repayable within 1 year.

(h) $110 000 of other loans is repayable within 1 year.

(i) The provision for employee benefits includes $58 000 payable within 1 year.

(j) The warranty provision is in respect of a 12-month warranty given on certain goods sold.

(k) Other expenses included payments to the auditors Auditcheck for audit services of $15 000 and an amount of $3 500 for taxation services.

(l) Unicorn Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement.

(m) Unicorn Ltd measures inventory at the lower of cost and net realizable value and buildings, plant and equipment using the cost model.

Summarised account balances are provided below:

Year-end balances, 30 June 2016	$
Cash on hand	4 000
Cash on deposit, at call	100 000
Accounts receivable - trade	450 000
Allowance for doubtful debts/ impairment	14 000
Other debtors	93 000
Raw Materials inventories, 30 June 2016	188 000
Finished goods inventories, 30 June 2016	714 000
Land	102 000
Buildings	155 000
Accumulated depreciation - buildings	36 000
Plant and equipment	1 260 000
Accumulated depreciation - plant and equipment	564 000
Patents	48 000
Accumulated amortisation of patent	3 000
Goodwill	870 000
Listed investments (available for sale)	225 000
Bank loans	66 000
Other loans	570 000
Accounts payable- trade	510 000
Provision for employee benefits	93 000
Provision for warranty	37 000
Current tax liability	25 000
Deferred tax liability	135 000
Retained earnings, 30 June 2015	326 000
Investments revaluation reserve	42 000
Share Capital	1 691 000
Dividends paid	150 000
Land revaluation reserve	50 000

Required:

For the year ending 30 June, 2016,

1. Using the pro forma table supplied in appendix B, prepare a preliminary trial balance forUnicorn Ltd;

2. Prepare a statement of comprehensive income for Unicorn Ltdin accordance with the requirements of AASB 101. Unicorn Ltd uses the single statement format for the statement of comprehensive income and classifies expenses by function within the statement;

3. Prepare a statement of changes in equity for Unicorn Ltd in accordance with the requirements of AASB 101;

4. Prepare a statement of financial position for Unicorn Ltdin accordance with AASB 101. Use the current/non-current presentation format;

5. Prepare appropriate notes to the accounts.(You do notneed to preparenotes related to income taxes. Include the following note as note

1. You may optionally add accounting policies to this note):(16 marks).

"1. Summary of significant accounting policies

Basis of accounting

The financial report is a general purpose financial report which has been prepared on the historical cost basis, except where stated otherwise.

Statement of Compliance

The financial statements have been prepared in accordance with the requirements of the Corporations Act, Australian Accounting Standards which include Australian equivalents to International Financial Reporting Standards (AIFRSs) and AASB Interpretations. Compliance with AIFRSs ensures the financial statements and notes comply with International Financial Reporting Standards"

PART C

The comparative statement of financial position and statement of profit or loss of Griffin Ltd for the year ended 30 June 2016are as follows:

GriffinLtd Statement of Financial Position as at 30 June 2016
		2016	2015
Current assets
Cash at bank		$   114 000	$   70 000
Cash deposits (30-day)		80 000	30 000
Accounts receivable		82 000	75 000
Allowance for doubtful debts		(9 000)	(5 000)
Interest receivable		4 000	3 000
Inventories		226 000	200 000
Prepayments		3 000	7 000
		500 000	380 000
Non-current assets
Land		120 000	100 000
Plant		700 000	600 000
Accumulated depreciation		(180 000)	(140 000)
Investment in associate		92 000	80 000
Brand names		90 000	120 000
		822 000	760 000
Total assets		$ 1322 000	$ 1 140 000
Current liabilities
Accounts payable		$  196 000	$ 180 000
Interest payable		18 000	12 000
Current tax payable		42 000	40 000
		256 000	232 000
Non-current liabilities
Borrowings		138 000	98 000
Deferred tax liability		40 000	35 000
Provision for employee benefits		33 000	20 000
		211 000	153 000
Total liabilities		467 000	385 000
Equity
Share capital		530 000	500 000
Retained earnings		325 000	255 000
		855 000	755 000
Total liabilities and equity		$ 1 322 000	$ 1140 000

Additional information in relation to the year ended 30 June 2016:

a) There were no cash sales during the year.

b) Bad debts written off during the year amounted to $2000

c) 30-day cash deposits are used in the course of the daily cash management of the company

d) There have been no asset revaluations during the year

e) Disposals of plant comprised: original cost $50 000, accumulated depreciation $10 000

f) Movements in "Investment in associate" account comprised $20 000 share of profit of associate less $8 000 dividend received

g) Income tax expense comprises current tax payable component of $42 000 and a deferred tax liability component of $5 000

Required

1. Prepare working papers showing calculations to determine cash flows from operating, investing and financing activities required to be disclosed under AASB 107 using the direct method. Use of T accounts or equations is acceptable;

2. Prepare the Statement of Cash Flows for GriffinLtd for the year ending 30 June 2016 in accordance with AASB 107. Comparatives are not required

3. Provide a reconciliation of net profit after tax with net cash provided by operating activitiesin accordance with AASB1054.

APPENDIX A: PRESENTATION REQUIREMENTS (Departures attract a penalty)

1. The hard copy of the assignmentmust be handed into the lecturer in class.It is also required to be submitted through Turnitin by the due date;

2. It is worth 25% of the final grade but will be marked out of 100;

3. The assignment will be marked on the basis of a requirement of "suitable for publication", that is, the relevant statements/notes comprise an external report;

4. The assignment must be performed individually.

5. You are to employ an aggregated format whenever appropriate and consistent with provision of minimum line items prescribed in AASB101;

6. The suggested word limit for Part A is 500 words in total.

7. The financial statements and the notes are to be typed in 12 point font;

8. You arenot to use specialized accounting software packages, such as are employed by professional accounting firms, to produce your financial reports;

9. You are to apply the "cost of sales" method to the classification of expenses in the income statement (see AASB101 paras 97-105);

10. You are directed to use the current/non-current format for the statement of financial position (balance sheet) and supply a "net assets" line item;

11. The notes are to be simplified equivalences to published reports; that means a list of constituent components of a given line item with their respective dollar amounts, not footnotes; for Part B there is one set of notes to cover all statements, numbered sequentially from 1 (as supplied);

12. Your hard copy assignment is to be collated in the following order:

Coversheet (optional for electronic version but mandatory, signed with ticked module and Turnitin ID, for hard copy), followed by Part A (questions 1 and 2), Part B (trial balance, statement of comprehensive income, statement of changes in equity, statement of financial position, and notes to the accounts), and Part C (working papers, statement of cashflows andreconciliation).

APPENDIX B

Unicorn Ltd- Trial Balance as at 30 June 2016	DR	CR
	$'000	$'000
Sales
Interest income
Sundry income
Cost of sales
Employee benefit expenses- Administration
Depreciation expense - Administration
Distribution expenses
Insurance expenses
Rental expense- Office
Sales and marketing expenses
Doubtful debts expense
Interest expense
Other borrowing expenses
Income tax expense
Cash on hand
Cash on deposit, at call
Accounts receivable - trade
Allowance for doubtful debts/ impairment
Other receivables
Raw materials inventories, 30 June 2016
Finished goods inventories, 30 June 2016
Land
Buildings
Accumulated depreciation - buildings
Plant and equipment
Accumulated depreciation - plant and equipment
Patents
Accumulated amortisation of patent
Goodwill
Listed investments (available for sale)
Bank loans
Other loans
Accounts payable -Trade
Provision for employee benefits
Provision for warranty
Current tax liability
Deferred tax liability
Retained earnings, 30 June 2015
Investment revaluation reserve
Dividends paid
Land revaluation reserve
Share capital
Totals