SAPL - Exercise on Cash flows
Time: 20 Minutes
Khan was very happy with the past performance of his private limited company known as “Space
Architecture Pvt. Ltd. (SAPL)”. SAPL began its financial year on 1-4-2009 with cash balance of
3001. The following transactions took place between 1-4-2009 to 31-3-2010. Compute the closing
cash balance and prepare a cash flow statement for the said period by showing cash from/used in
operating activities, investing activities and financing activities.
1. Before public issue, Khan decided to strengthen his shareholding by issuing bonus shares by
transfer from reserves & surplus. The opening capital was 1000 (100,000 shares with face
value of 10) and reserves & surplus was 3000.
2. 90,000 shares (face value 10) were issued at a premium of 40. The name of the company was
changed to Space Architecture Ltd. (SAL).
3. Towards end of 2009-10, SAL bought back 10,000 shares from the market at 25 per share.
4. Office equipments (mainly computers) having gross value of 150 and accumulated
depreciation of 50 were sold for 80 and the entire amount was received from the buyer. New
computers worth 100 were purchased on cash basis.
5. SAL re-valued its office building located in the prime area (historical cost 2000 with
accumulated depreciation of 300) and increased the gross value by 1500.
6. SAL bought and sold mutual funds during the year. The total purchase was 1000 of which
investment worth 400 was sold for 500. A dividend of 50 was received from such investment.
7. The profit before tax for the year ended on 31-3-2010 was 480. The total depreciation for the
year was 200.
8. It paid advance income tax of 100, provision for tax was 80, interim-dividend of 70 was paid
and final dividend of 70 was proposed which would be paid in 2010-11 if approved by
shareholders.
9. Receivables increased by 200 and payables decreased by 50.
10. A wholly-owned (100% capital with SAL) subsidiary company for providing structural
consultancy services was set up by investing 300 in its share capital. This subsidiary had
proposed a dividend of 15 and SAL was entitled to receive it.
Selected Answers: Cash flow from operating activities: Cash flow before working capital
changes = 535, working capital changes = -250, Taxes paid = -100, Total=185; Cash flow from
investing activities: Purchase of equipts = -100, Sale of equipts = 80, Purchase of investments = -
1000, Sale of investments = 500, Investments in subsidiary = -300, Dividend income = 50, Total
= -770; Cash flow from financing activities: Issuance of shares = 4500, Buy-back of shares = -
250, Dividend paid = -70, Total = 4180.
Net changes in cash during the year = 3595, Closing balance of cash = 3895.
1
All amounts are in Rs. thousands.
