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MSIN0211 Financial Frameworks

Workshop #1 Practice question – LOOP Ltd.

Use the following information for LOOP Ltd to practice preparing a simple cash flow, income statement and balance sheet

LOOP Ltd…buys and resells loopy items... The first financial year saw the company:

1. Issue 100 ordinary shares with a nominal value of £2 at £2 for cash.

2. Obtain a £500 bank loan @ 10% annual interest

3. Pay annual rent for the year of £4

4. Buy equipment for £50 cash, to be used for 5 years, depreciated using straight line method.

5. Buy inventory on credit (on account) for £50; by end of year still owed £12 of that £50)

6. Sold on account/credit terms for £90, 75% of inventory bought; by end of year, account customers still owed £20 of that £90.

7. Paid various expenses totalling £6, all paid in cash.

8. Paid bank loan interest of £50, and calculated and paid tax bill of £30

9. Salaries totalled £100 but only £90 was paid by the end of the financial year.

10. Repaid £100 of the bank loan.

11. No dividends were issued.

Required:

Prepare cash flow and income (aka profit) statements for the year and year- end balance sheet (SoFP) for LOOP Ltd