Problem: The data on the balance sheet of Sao Do Co.

plc on Dec 31 th, N-1 are as

follows: Owner’s equity: 800m. Long-term loan: 200m. Short-term loan: 200m.
Payable to suppliers: 120m. Fixed assets: historical costs 800m, net fixed assets 700m.
Inventories: 200m. Receivable from customers: 110m. Cash: 310.
The data of the first quarter of the year N are as follows:
1. The total amount from sales of goods and service provisions including VAT is
880m, of which 330m is the total amount from sales of goods subject to SST. 60% of
the amount is paid in the quarter of the sale, the remaining is paid in the next quarter.
2. The total amount payable of raw material purchases to domestic suppliers excluding
VAT equals 60% of the total amount from sales of goods and service provisions
excluding VAT. 50% of the total amount payable including VAT is paid during the
quarter of the purchases, the remaining is paid after that.
3. Direct costs (excluding raw materials and depreciation of fixed assets): 45m. These
costs are paid during the quarter when incurred.
4. Indirect costs (excluding depreciation of fixed assets, outside purchasing services
cost, and the other tax): 21m. 60% of these costs are attributed to selling expenses,
and the remaining to general & administrative expenses. These costs are paid during
the quarter when incurred.
5. Depreciation of fixed assets is 19 m, of which 12m is attributed to direct cost, and
the remaining to general & administrative expenses.
6. The total amount of outside purchasing services cost excluding VAT: 20m. It is
attributed to selling expenses. This cost is paid during the quarter when incurred.
7. Inventories at the end of the first quarter: 110m
8. Short-term loan interest rate: 1% per month. This interest is paid once per two
months, the first payment is due in February. Long-term loan interest rate: 15% per
year. This interest is paid equally twice per year, the first payment is due in March.
9. Disposal of a fixed asset (subject to VAT 10%) on March, 31 th: 17m (excluding
VAT). The historical cost: 50m. Net book value: 18m. Other related costs are
negligible. The payment is made immediately.
10. VAT: Sao Do is required to use the credit method (also called the deduction
method). The VAT rate: 10% applied to purchases of goods and raw materials, sales,
disposal of a fixed asset, and the outside purchasing services cost. SST rate: 50%. The
amount of SST calculated from raw material purchases is 120m of which a portion
namely 80m is allocated to goods sold. VAT and SST are calculated and paid during
the quarter. CIT rate: 20%. CIT is paid in the next quarter. Another tax attributed to
general & administrative expenses is paid in Feb: 3m.
Required
1. What is Sao Do’s total amount of taxes?
2. Construct the income statement for the first quarter of the year N.
3. Prepare a table that shows the computation of cash flows of the first quarter.
4. Construct the balance sheet on Jan 1st, N and March 31th, N.
5. Comment on the profitability of Sao Do in the first quarter of the year N.
6. Construct the cash flows statement (direct method) (assuming that the direct costs
(mentioned at 3) and indirect costs (mentioned at 4) are payments to employees)
7. Construct the cash flows statement (indirect method)