(a). Briefly explain what is meant by off-balance sheet financing and its effects on the financial statements
(b). The summarized cash account and the fixed asset schedule of Pivot Ltd. For the year ended 31 December 2001 are as given below:
|
Summarized Cash Account
|
|
|
Sh. '000'
|
|
Sh. '000'
|
|
Balance brought down
Cash from cash sales
Cash from credit sales
Cash from issue of shares
Cash from sale of buildings
Balance brought down
|
500
3,500
5,750
1,200
970
_____
11,920
4,700
|
Wages
Cash paid to suppliers
Tax paid
Cash paid on finance lease
Final dividend for year 2000
Interim dividend for year 2001
Other expenses
Balance carried down
|
1,350
4,320
100
700
100
50
600
4,700
11,920
|
|
Fixed assets schedule
|
|
|
Plant Sh.'000'
|
Building Sh.'000'
|
Total Sh.'000'
|
|
Cost at 1 January 2001
Acquisitions
Disposal
Cost at 31 December 2001
Accumulated depreciation:
Balance brought forward
Charge for the year
Disposals
Accumulated depreciation:
Balance as at 31 December 2001
|
10,000
4,730
-
14,730
3,500
650
-
4,150
|
15,000
-
(5,000)
10,000
6,000
1,500
(4,500)
3,000
|
25,000
4,730
(5,000)
24,730
9,500
2,150
(4,500)
7,150
|
Other information:
Tax charge for the year was Sh.400,000. The opening balance on the tax liability account was Sh.100,000.
The proposed final dividend for the year 2001 was Sh.120,000.
Other expenses include insurance, which is paid a year in advance on 30 June. In the year 2000, insurance of Sh.300,000 was paid. The amount paid in the year 2001 was Sh.400,000.
Accrued wages were Sh.75,000 at 1 January 2001 and Sh.95,000 at 31 December 2001.
Stocks were Sh.1,500,000 at January 2001 and Sh.1,700,000 at 31 December 2001.
All Sh.700,000 paid on the finance lease in the year 2001 represented capital. This was the first year of the lease and interest was not paid until the second payment, which was made in the year 2002. Interest at Sh.403,000 was included in the year 2002 payment and was accrued in the year 2001 financial statements.
Opening and closing trade debtors and trade creditors were:
|
|
1 January 2001
Sh.
|
31 December 2001
Sh.
|
|
Trade debtors
Trade creditors
|
300,000
500,000
|
450,000
475,000
|
6,000 ordinary shares of Sh.100 per value were issued at a premium on 1 March 2001.
Revenue reserves of Pivot Ltd. as at 31 December 2000 were Sh.948,000
Revenue reserves of Pivot Ltd as at 31 December 2001 were Sh.1,680,000.
Required:
A statement of cash flow using the direct method, including a reconciliation of the profit for the year with cash from operations