Level 3 financial statements revision answers
Cash Flow Statement answer
Note the format provided here is NOT the NCEA format
This simply shows the correct line items and figures for each section
Garden Sheds Cash Flow Statement
for the year ended 31 March 2013
$000
$000
Cash from operating activities
Cash from customers
8,552
Cash paid to suppliers
(3,905)
Interest
(67)
Expenses
(1,768)
Wages
(1,265)
Tax
(276)
Net cash from operating activities
1,271
Cash from investing activities
Sale of equipment
17
Purchase of equipment
(115)
Purchase buildings
(300)
Net cash from investing activities
(398)
Cash from financing activities
Loan repaid
(75)
Share repurchase
(34)
Dividends
Net cash from financing activities
(737)
(846)
Net cash inflow (outflow)
27
Bank balance at beginning
(15)
Bank balance at end
12
Garden Sheds General Journal
31/3
Income summary (tax expense)
390,000
Taxation Payable
390,000
Contributed Equity
22,000
Retained Earnings
12,000
Bank
34,000
Garden Sheds General Journal (continued)
31/3
Land
80,000
Land Revaluation Surplus
Retained Earnings
Dividends paid
80,000
737,000
737,000
Sale of equipment
The $17,000 recorded for sale of equipment is the actual cash received. The cash flow statement only
records actual cash movements. The cost of the equipment is what it originally cost to purchase, while the
carrying amount is the book value of the equipment – ie its cost $80,000 less accumulated depreciation to
date of sale, $32,000. The loss on sale of equipment of $31,000 indicates that insufficient depreciation has
been charged against the cost from the purchase date to the sale date. This loss is an internal non-cash
transfer / book entry only to write off the full cost of the equipment sold from the accounting records. No
cash movement is involved with the determination of the carrying amount (writing off depreciation each
year) or the loss on sale of the equipment so these are not recorded in the cash flow statement. Only the
actual cash received.
Land revaluation
The revaluation of the land is a book entry only not involving any cash flow/is a non-cash transfer of an
increase in the value of land. Land has increased in value and the increase in value is recorded as
comprehensive income which increases equity. The land has not been sold so there is no cash to record
from a sale, nor has any land been purchased, so there is no cash to record from a purchase.
Or
the revaluation of land is a book entry increasing land by debit land $80,000 and credit land revaluation
surplus $80,000 so there is no cash involved so nothing to record in the cash flow statement for the land
revaluation – it is an unrealised gain in value only.
Reporting revision exercise
Note answers not in the order of the question – provided to illustrate the requirements.
Garden Tools Statement of Comprehensive Income
for the year ended 31 March 2013
Revenue
Add Other Income
Less Expenses
Bad debts
Doubtful debts
Cost of goods sold
Directors fees
Auditors' remuneration
Donations
General expenses
Wages and salaries
Vehicle expenses
Depreciation on plant and equipment
Depreciation on buildings
Depreciation on vehicles
Finance costs
Total expenses
Profit before tax
Tax expense
Profit for the year
Add other comprehensive income
Gain on revaluation land
Gain on revaluation buildings
Total other comprehensive income
Total comprehensive income for the year
Garden Tools Notes to the Financial Statements
Revenue
Sales
775,000
Other Income
Dividends received
Gain on sale of vehicles
Increase in fair value of financial assets
2,200
1,000
4,000
7,200
Auditors' remuneration
Audit fee
17,000
Finance Costs
Interest on debentures
3,600
775,000
7,200
782,200
500
700
433,000
25,000
17,000
9,000
38,000
67,000
17,000
12,000
2,000
10,000
3,600
634,800
147,400
42,000
105,400
5,000
9,000
14,000
119,400
Note: Financial assets were not identified as current or non-current in the additional information. Financial
assets could be classified as current assets. Either treatment is correct, unless information is provided to
the contrary.
Subtotals have not been provided. This evidence is to show the line items and correct amounts for the line
items.
Garden Tools Statement of Financial Position
as at 31 March 2013
Current Assets
Bank
2,000
Accounts Receivable
30,400
Inventory
37,000
Prepayments
3,000
Accrued Income
1,200
Non-current assets
Financial assets
34,000
Property, plant and equipment
310,000
Total assets
Current Liabilities
GST
2,600
Taxation payable
24,000
Accounts Payable
30,300
Accrued Expense
2,300
Non-current liability
Debentures
60,000
Total liabilities
Net assets
Equity
Contributed Equity
128,000
Revaluation surplus land
17,000
Revaluation surplus buildings
14,000
Retained earnings
139,400
417,600
119,200
298,400
298,400
Garden Tools Notes to the Financial Statements
Accounts Receivable
Accounts Receivable
Less Allowance for doubtful debts
Financial assets
Opening balance
Increase in fair value recognised in profit
Closing balance
Financial assets comprise shares in Briscoe Group Ltd
32,000
-1,600
30,400
30,000
4,000
34,000
Property plant and equipment
Land
For the year ended 31 March 2013
Opening carrying amount
Additions
Disposals
Depreciation
Revaluation
Closing carrying amount
As at 31 March 2013
Cost or valuation
Accumulated Depreciation
Closing carrying amount
Buildings
62,000
138,000
5,000
67,000
-2,000
9,000
145,000
67,000
145,000
67,000
145,000
Contributed equity
Opening Balance
Repurchase of shares
Share issue
Closing Balance
Garden Tools General Ledger
Retained Earnings
1/4/12 Balance
31/3/13 Bank (share repurchase)
Dividends
Profit
Contributed Equity
1/4/12 Balance
31/3/13 Bank (share repurchase)
Vehicles
Plant and
Equipment
35,000
30,000
-15,000
-10,000
-12,000
40,000
58,000
70,000
-30,000
40,000
120,000
-62,000
58,000
No of
shares
45,000
-5,000
15,000
55,000
Total
70,000
310,000
$
96,250
-11000
42,750
128,000
3,500
30,000
105,400
67,500
64,000
34,000
139,400
Cr
Cr
Cr
Cr
96,250 Cr
11,000
85,250 Cr
Bank (share issue)
42,750
128,000 Cr
Note: In the Retained Earnings account Dividends can be shown separately as Final dividend 2012 $20,000
and Interim dividend 2013 $10,000
Garden Tools General Journal
31/3
Income summary (Tax expense)
42,000
Taxation Payable
Taxation Payable
Provisional tax paid
42,000
18,000
18,000
Garden Tools General Journal (continued)
31/3
Bank
42,740
Contributed Equity
Depreciation – buildings
42,750
2,000
Accumulated depreciation buildings
Accumulated depreciation buildings
2,000
6,000
Buildings
Buildings
Buildings Revaluation Surplus
6,000
9,000
9,000
Impact on Statement of Comprehensive Income
(i)
Revaluation of land increases “other comprehensive income” by $5,000 and therefore
increases total comprehensive income for the year by $5,000.
Or
The (unrealised) gain in revaluation of land of $5,000 is reported as other comprehensive
income increasing total comprehensive income for the year.
(ii)
The increase in fair value of financial assets from $30,000 to $34,000 increases “other income”
and therefore increases profit before tax and profit for the year in the statement of
comprehensive income – total comprehensive income is also increased by $4,000.
Or
This (unrealised) gain in the value of financial assets $4,000 increases other income, therefore
increasing profit for the year and total comprehensive income for the year by $4,000
Note ignore tax effect – tax effect does not need to be explained – deferred tax not assessed at
Level 3 and if held long term, no tax on capital gains
(iii)
Provisional tax paid itself does not impact on the comprehensive income statement, it actually
reduces the taxation payable in the statement of financial position. The tax expense of $42,000
impacts on the statement of comprehensive income by reducing profit before tax to profit for
the year which is after the taxation expense. The provisional tax paid is only part of the
taxation expense that has already been paid to the IRD/Govt reducing the taxation payable on
balance day.
Temporary current asset
Accrued income – dividends are owing from Briscoe Group Ltd and will be received in the next period so
the asset just relates to balance day as the dividends are included in income. The asset doesn’t exist after
balance day. The dividends will be received but have already been correctly reported as income this
period.
Temporary current liability
Accrued expense – wages and salaries owing $2,000. Wages and salaries included as expense this year and
the liability is just for balance day. It doesn’t exist after balance day. The wages will be paid but have
already been correctly reported as an expense in this period.