Activity 5: Thorstved Co

Below are the statements of financial position for Thorstved Co at 31 December 20X7 and 31
December 20X8 and the statement of profit or loss and other comprehensive income for the year
ended 31 December 20X8.

STATEMENTS OF FINANCIAL POSITION

20X8 20X7
$’000 $’000
ASSETS
Non-current assets
Property, plant and equipment 798 638
Development costs 110 92
908 730
Current assets
Inventories 313 280
Trade receivables 208 186
Cash 111 4
632 470
Total assets 1,540 1,200

EQUITY AND LIABILITIES

Equity
$1 ordinary shares 220 200
Share premium 140 80
Revaluation surplus 42 –
Retained earnings 599 570
1,001 850

Non-current liabilities
4% loan notes 250 100
Deferred tax 76 54
Provision for warranties 30 26
356 180
Current liabilities
Trade payables 152 146
Current tax payable 26 24
Interest payable 5 –
183 170
Total equity and liabilities 1,540 1,200

TT2023
720 Financial Reporting (FR)

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 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

$’000
Revenue 1,100
Cost of sales (750)
Gross profit 350
Expenses (247)
Finance costs (10)
Profit on sale of equipment 7
Profit before tax 100
Income tax expense (30)
PROFIT FOR THE YEAR 70
Other comprehensive income:
Gain on property revaluation 60
Income tax relating to gain on property revaluation (18)
Other comprehensive income for the year, net of tax 42
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 112

Notes.
1 Depreciation of property, plant and equipment during 20X8 was $54,000 and deferred
development expenditure amortised was $25,000.
2 Proceeds from the sale of equipment were $58,000, giving rise to a profit of $7,000. No other
items of property, plant and equipment were disposed of during the year.
3 Finance costs represent interest paid on the loan notes. New loan notes were issued on 1
January 20X8.
4 The company revalued its property at the year end. Company policy is to treat revaluations
as realised profits when the asset is retired or disposed of.
Required
Prepare a statement of cash flows for Thorstved Co for the year ended 31 December 20X8, using
the indirect method in accordance with IAS 7.

Solution
THORSTVED CO
STATEMENT OF CASH FLOWS FOR YEAR ENDED 31 DECEMBER 20X8
(INDIRECT METHOD)

$’000 $’000

Cash flows from operating activities

Profit before taxation

Adjustments for:

Depreciation

Amortisation

TT2023
22: Essential Reading 721
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 $’000 $’000

Interest expense

Profit on disposal of equipment

Increase in inventories (W4)

Increase in trade receivables (W4)

Increase in trade payables (W4)

Increase in provisions (W4)

Cash generated from operations

Interest paid (W3)

Income taxes paid (W3)

Net cash from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment (W1)

Proceeds from sale of equipment

Development expenditure (W1)

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue of share capital (W2)

Proceeds from issue of loan notes (W3)

Dividends paid (W2)

Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalent at end of year

Workings
1 Assets

Property, plant &

equipment Development costs

$’000 $’000

b/d

TT2023
722 Financial Reporting (FR)

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 Property, plant &
equipment Development costs

$’000 $’000

Depreciation/amortisation

SPLOCI – OCI

Non-cash additions

Disposals

Cash paid/(rec’d) β

c/d

2 Equity

Share capital/ share

premium Retained earnings

$’000 $’000

b/d

SPLOCI

Non-cash

Cash (paid)/rec’d β

c/d

TT2023
22: Essential Reading 723
1059060
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 3 Liabilities

Income tax
Loan notes payable Interest payable

$’000 $’000 $’000

b/d

SPLOCI – P/L

– OCI

Non-cash

Cash (paid)/rec’d β

c/d

4 Working capital changes

Trade Trade
Inventories receivables payables Provisions

$’000 $’000 $’000 $’000

b/d

Increase/ (decrease) β

c/d

TT2023
724 Financial Reporting (FR)

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