Jam Ltd: Statement of financial performance for the year ended 31December 2021£Sales revenue9,240,000Cost of sales(5,270,400)Gross profit3,969,600Investment income40,000Administrative expenses(2,400,000)Distribution costs(196,000)Profit before interest and taxation1,413,600Finance cost(540,000)Profit before taxation873,600Taxation(276,000)Profit for the year597,600During the year, property, plant and equipment was sold for £60,000. The originalcost of these assets was £1,800,000 and the accumulated depreciation on thedate of disposal was £1,440,000.Investment income relates to interest.Required(a) Prepare the reconciliation of profit before tax to net cash flow generatedfrom / (used in) operating activities. Remember to show your workings.(b) Prepare an extract of the cash flow statement to calculate the net cash flowgenerated from / (used in) investing activities. Remember to show yourworkings.(c) Comment on the performance of Jam Ltd in relation to investing activities asindicated by the net cash flow generated from / (used in) investing activities. Below are Jam Ltd's statements of financial position as at 31 December 2021and 2020 and statement of financial performance for the year ended 31Question 2December 2021.Jam Ltd: Statements of financialpositionas at 31 December20212020ASSETS£Non-current assetsProperty, plant and equipment at cost7,800,0007,440,000Accumulated depreciation(2,640,000)(2,160,000)Net book value5,160,0005,280,000Investments1,200,000300,000Total non-current assets6,360,0005,580,000Current assetsInventory2,080,0002,822,000Receivables2,175,0002,648,400Interest receivable5,0008,000Bank524,000Total current assets4,260,0006,002,400Total assets10,620,00011,582,400EQUITY AND LIABILITIESShare capital and reservesOrdinary shares of £1 each3,790,0002,000,000Preference share capital50,000820,000Retained earnings648,00050,400Total equity4,488,0002,870,400LiabilitiesNon-current liabilities: bonds3,500,0006,480,000Current liabilitiesBank overdraft736,000Interest payable96,00040,000Payables1,560,0002,072,000Corporation taxation payable240,000120,000Total non-current liabilities2,632,0002,232,000Total liabilities6,132,0008,712,000Total equity and liabilities10,620,00011,582,400

The income statement does not show the profit or loss (loss here) from the sale of plant, property,…

Jam Ltd: Statement of financial performance for the year ended 31 December 2021 Sales revenue 9,240,000 Cost of sales |(5,270,400) Gross profit 3,969,600 Investment income 40,000 Administrative expenses (2,400,000) Distribution costs (196,000) Profit before interest and taxation 1,413,600 Finance cost (540,000) Profit before taxation 873,600 Taxation (276,000) Profit for the year 597,600 During the year, property, plant and equipment was sold for £60,000. The original cost of these assets was £1,800,000 and the accumulated depreciation on the date of disposal was £1,440,000. Investment income relates to interest. Required (a) Prepare the reconciliation of profit before tax to net cash flow generated from / (used in) operating activities. Remember to show your workings. (b) Prepare an extract of the cash flow statement to calculate the net cash flow generated from / (used in) investing activities. Remember to show your workings. (c) Comment on the performance of Jam Ltd in relation to investing activities as indicated by the net cash flow generated from / (used in) investing activities.

Jam Ltd: Statement of financial performance for the year ended 31 December 2021 Sales revenue 9,240,000 Cost of sales |(5,270,400) Gross profit 3,969,600 Investment income 40,000 Administrative expenses (2,400,000) Distribution costs (196,000) Profit before interest and taxation 1,413,600 Finance cost (540,000) Profit before taxation 873,600 Taxation (276,000) Profit for the year 597,600 During the year, property, plant and equipment was sold for £60,000. The original cost of these assets was £1,800,000 and the accumulated depreciation on the date of disposal was £1,440,000. Investment income relates to interest. Required (a) Prepare the reconciliation of profit before tax to net cash flow generated from / (used in) operating activities. Remember to show your workings. (b) Prepare an extract of the cash flow statement to calculate the net cash flow generated from / (used in) investing activities. Remember to show your workings. (c) Comment on the performance of Jam Ltd in relation to investing activities as indicated by the net cash flow generated from / (used in) investing activities.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 24CE

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