Dolente Ltd is a small company which designs, manufactures and sells innovative electronic instruments. The directors of the company have discussed the financial statements prepared for the year ended 31st

Dolente Ltd is a small company which designs, manufactures and sells innovative electronic instruments. The directors of the company have discussed the financial statements prepared for the year ended 31st March 2020 and have made the following remarks. “We are surprised to see that we have a loss for the year as our bank balance seems to be healthy and has increased from the 2019 figure”. Required: Using the information provided by the cash flow statement, comment on the remarks of the directors on the results for the year (120-170 words at least). Transcribed Image Text: Income Statement for the year ended 31st March
2020
£000
Turnover
2,480
Cost of sales
(2,004)
Gross profit
476
Distribution costs
(290)
Administrative expenses
(134)
Operating profit
52
Interest payable
(46)
The following are the financial statements of Dolente Ltd for the two years ended 31$t March 2020.
Exceptional items
(20)
Loss before taxation
(14)
2020
2019
Тахation
Statement of Financial Position as at 31st March
£000
£000
£000
£000
Loss for the year
(14)
Non current assets
The following further information is available:
Tangible
862
820
(1) Tangible non-current assets:
Intangible
134
996
128
948
Cost
Accumulated
Net
Current assets
£000
£000
£000
Inventories
520
488
As at 1st April 2019
1,242
422
820
Trade debtors
280
302
Additions, at cost
164
164
Prepayments
38
46
Disposals
(60)
(26)
(34)
Depreciation for the year
88
(88)
Bank
166
1,004
214
1,050
As at 31st March 2020
1,346
484
862
Total Assets
2,000
1,998
The assets were sold for cash proceeds of £10,000. Any profit or loss arising is included in the operating profit for
the year.
Liabilities
(2) Intangible non-current assets: These are patents on innovative electronic instruments.
Creditors falling due within 1 year
800
820
Creditors falling due after 1 year
£000
Loans
462
1262
426
1246
As at 1st April 2019
128
Equity and reserves
Purchases
40
Ordinary shares of £1 each
600
600
Amortization (in operating profit)
(14)
Exceptional write down
(20)
Share premium
50
50
As at 31st March 2020
134
Retained earnings
88
738
102
752
(3) Prepayments all relate to expenses charged against operating profits.
Total Liabilities and Equity
2.000
1,998
(4) Creditors falling due within one year
2020
2019
£000
£000
Trade creditors
786
650
Accrued interest
14
10
Taxation
160
800
820 Transcribed Image Text: Statement of Cash Flows (Indirect method)
Particulars
Amount in £000 Amount in £000
Cash Flow from operating activities:
Net loss
Adjustments:
Loss on sale of assets
Depreciation
Amortization
Exceptional write down
Decrease in accounts receivable
Increase in Inventories
Decrease in Prepaid expenses
Increase in Accounts payable
Increase in Accrued Interest
Decrease in Taxation
-14
24
88
14
20
22
-32
8
136
4
-160
124
Cash flow from Operating Activities
Cash Flow from Investing Activites:
Proceeds from sale of assets
Cash paid for purchase of assets
Cash Paid for purchase of Patent
Net Cash flow from Investing activities
Cash Flow from Financing Activities:
110
10
-164
-40
-194
Loans
36
Common stock issued
Net cash flow from Financing activities
Net change in cash
Beginning cash balance
Ending cash balance
140
176
92
214
306
Working Note:
Loss on sale of assets
Cost
60
Less: accu. Depreciation
26
Book Value
34
Sale proceed
10
Loss on sale of assets (34-10)
24

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