HKAAT Paper 7 Advanced Accounting December 2003 Q.C1 The draft financial statements of Hanford Ltd are given below

The following information is available:

(1)    Cost of sales includes a loss on sale of plant of $150,000, and a credit for the transaction of government grants.

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(2)    The plant maintenance provision was released to the income statement in the year to 31 December 2002 as these provisions are no longer required, following the company’s change of accounting policy to account for maintenance costs on an actual incurred basis.

(3)    The company revalued its buildings by $600,000 on 1 September 2002. The surplus was credited to a revaluation reserve.

(4)    New plant was acquired during the year at a cost of $750,000 and a government grant of $150,000 was received for the plant. The remaining movement on property, plant and equipment was due to the disposal of obsolete plant.

(5)    On 1 July 2002 a bonus issue of 1 new share for every 10 held was made from the revaluation reserve. In addition to the bonus issue, the company made a further issue of ordinary shares for cash.

Required:

Use the indirect method to prepare a statement of cash flows for Hanford Ltd for the year ended 31 December 2002 in accordance with the requirements of HKAS 7. Show all workings.

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