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SOLUTION

This information will be incorporated into the consolidated statement of cash flows as follows:
Statement of cash flows for 20X2 (extract) Amount Amount
(Rs.) (Rs.)
Cash flows from opening activities
Profit before taxation 70,000
Adjustments for non-cash items:
Depreciation 30,000
Decrease in inventories (Note 1) 9,000
Decrease in trade receivables (Note 2) 4,000
Decrease in trade payables (Note 3) (24,000)
Interest paid to be included in financing activities 4,000
Taxation (11,000 + 15,000 – 12,000) (14,000)

Net cash inflow from operating activities 79,000
Cash flows from investing activities
Cash paid to acquire subsidiary (74,000 – 2,000) (72,000)
Net cash outflow from investing activities (72,000)
Cash flows from financing activities
Interest paid (4,000)
Net cash outflow from financing activities (4,000)
Increase in cash and cash equivalents 3,000
Cash and cash equivalents at the beginning of the year 5,000
Cash and cash equivalents at the end of the year 8,000
Working Notes:
1. Inventories

Total inventories of the Group at the end of the year Rs. 30,000
Inventories acquired during the year from subsidiary (Rs. 4,000)
Rs. 26,000
Opening inventory (Rs. 35,000)
Decrease in inventory Rs. 9,000
2. Trade Receivables
Total trade receivables of the Group at the end of the year Rs.54,000
Trade receivables acquired during the year from subsidiary (Rs.8,000)
Rs.46,000
Opening trade receivables (Rs.50,000)
Decrease in trade receivables Rs. 4,000
3. Trade Payables

Trade payables at the end of the year Rs. 68,000
Trade payables of the subsidiary assumed during the year (Rs.32,000)
Rs. 36,000
Opening Trade payable Decrease in Trade payables (Rs. 60,000)
Rs. 24,000

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