568

Chapter 12 Analyzing Financial Statements: Cash Flow Statemen:

Business Decision Cases

BDC 12.1
Reliance Stationary
Company

On April 1, 20X3, Uday Ahuja started a store for selling high-quality stationery. His accouatant
has prepared the cash flow statement for the first year, as shown in the following table:

Sale of inventories
Sale of investments ....
Sale of share of capital
Depreciation
Long-term credit for purchase of van
Interest on investments

Uses of cash
Purchase of fixtures and office equipment
Purchase of inventories...................

lli#*k"Jffi#;
loans

Repayment of

Interest on bill

payable........

Net increase in cash

?29,960
6,4(X)

35,200

5,6m

2,4n
6rt0
79.20tt

.........

T27.2OCI
2O,2lC)

.........:..........:
................:....

'i,i:ii
g00

2lt)
70,480
8720

Uday thinks that he has had a successful year with cash increasing by <8,720. You notice
that the cash flow statement is incorrectly prepared.

Required
1. Prepare a correct cash flow statement using the direct method.
2. Prepare an evaluation of the Reliance Stationery Company's first year of working. Do
you agree with Uday's assessment about the .o*puoyi
BDC t2.2

Antariksh Materials
Company

Raghavendra Rao set up the Antariksh Materials Company in 20X3. Th'e company supplies
specialized materials to the Indian Space Research Organisation GSRO) for use in tle latter,s
space programme. Rao is considering proposals for investment totalling {100 million during
20X9. He hopes to meet the financing need by a combination of internal cash generation and
bank loans. The statement of profit and loss for the year ended June 30, 20X8, and the balance
sheet as at June 30, 20X7 and 20X8 are as follows:

Sales

Gain on sale of plant.............

Cost of goods sold

Selling and administrative expenses......

Interest expense........
Amortization of patents

Profit before income tax

Income tax

Profit after tax

{290,000
800
290,800
167,800
20,500
2,000
1,000

T-1roo
99,500

42,000
57,500

s68

Chapter 12 Analyzing Financial Statements: Cash Flow Statemen:

Business Decision Cases

BDC 12.1
Reliance Stationary
Company

On April 1, 20X3, Uday Ahuja started a store for selling high-quality stationery. His accog:rtant
has prepared the cash flow statement for the first year, as shown in the following table:

Sale of inventories
Sale of investments ....
Sale of share of capital
Depreciation
Long-term credit for purchase of van
Interest on investments

Uses of cash
Purchase of fixtures and office equipment
Purchase of inventories...................

;li#rh"Jffi#;

loans
Interest on bill payable........
Repayment of

Net increase in cash

?29,960
6,40O

35,200
5,600

2,4U)
6rt0
79.200

.........

T27.2OCI
2O,2lC)

......:.............:
:'i,i:ii
................:....

g00

Z{0
70,480
8720

Uday thinks that he has had a successful year with cash increasing by <8,720. You notice
that the cash flow statement is incorrectly prepared.

Required
1. Prepare a correct cash flow statement using the direct method.
2. Prepare an evaluation of the Reliance Stationery Company's first year of working. I)o
you agree with Uday's assessment about the .o*puoyi
BDC L2.2

Antariksh Materials
Company

Raghavendra Rao set up the Antariksh Materials Company in 20X3. Th'e company supplies
specialized materials to the Indian Space Research Organisation GSRO) for use in tle latter,s
space programme. Rao is considering proposals for investment totalling T100 million during
20X9. He hopes to meet the financing need by a combination of internal cash generation and
bank loans. The statement of profit and loss for the year ended June 30, 20X8, and the balance
sheet as at June 30, 20X7 and 20X8 are as follows:

Sales

Gain on sale of plant

Cost of goods sold

Selling and administrative expenses......

Interest expense........
Amortization of patents
Profit before income tax
Income tax

Profit after tax

{290,000
800
290,800
l-67,800
20,500
2,000
1,000

99,500

42,000
57,500