Question

Read the following information of Hydrogen Ltd., and answer the questions that follow:

Particulars	31.03.2023 (₹)	31.03.2022 (₹)
Share Capital (Equity shares ₹ 10 each)	9,50,000	6,00,000
Securities Premium	-	1,60,000
Bank Loan	2,00,000	1,50,000
Cash Credit	20,000	12,000
Balance in Statement of Profit & Loss	2,00,000	1,60,000
Provision for Tax	80,000	60,000
Trade Payables	30,000	25,000
Outstanding interest on debentures	3,500	-

Additional information:

During the year 2022-23, the company:

1. Issued bonus shares to the shareholders at the beginning of the year in the ratio of 1 : 4 (that is, 1 bonus share for every 4 shares held) by capitalising the Securities Premium.
2. Purchased office equipment for ₹ 2,40,000; payment made by issuing 20,000 Equity shares of ₹ 10 each to the vendor and the balance in cash.
3. Paid ₹ 4,000 for interim dividend.
4. The interest on all borrowings was ₹ 16,000, out of which the amount paid till the end of the year was ₹ 12,500.
5. Dividend of ₹ 15,000 proposed in the year 2021-22 was declared and paid.
6. Paid underwriting commission of ₹ 10,000.

1. How many bonus shares have been issued by the company to the shareholders?
2. What is the company’s Net Profit before Tax?
3. What is the Cash from Operating Activities of the company before tax paid?
4. What is Hydrogen Ltd.’s inflow/outflow of cash from Financing Activities?
5. Give the inflow/outflow of cash from Investing Activities, if any.
6. The Board of Directors of Hydrogen Ltd. proposed a dividend of ₹ 30,000 at the end of the year 2022-23.

State with reason the disclosure/non-disclosure of this dividend proposed in the Cash Flow Statement of the company for the year 2022-23.

Answer 1

(i) Number of Bonus Shares issued: 60,000 ÷ 4 = 15,000 Equity Shares,

(ii) Calculation of Net Profit before Tax:

Particulars		Amount (₹)
Balance of Statement of Profit & Loss on 31st March, 2023	2,00,000
Less: Balance of Statement of Profit & Loss on 31st March, 2022	1,60,000	40,000
Add:
Provision for Tax for 2023	80,000
Interim Dividend paid	4,000
Proposed Dividend for 2021-22	15,000	99,000
Net Profit before tax		1,39,000

(iii) Calculation of Cash from Operating Activities:

Particulars	Amount (₹)
Net Profit before Tax	1,39,000
Adjustment for non-cash and non-operating items:
Add: Interest on Borrowings	16,000
Operating Profit before Working Capital changes	1,55,000
Add: Increase in Trade Payables	5,000
Net Cash from Operating Activities before tax paid	1,60,000

(iv) Calculation of Cash from Financing Activities:

Particulars	Amount (₹)
Interim Dividend Paid	(4,000)
Interest paid on borrowings	(12,500)
Dividend paid for 2021-22	(15,000)
Payment of Underwriting Commission	(10,000)
Proceeds from Bank Loan	50,000
Increase in Cash Credit	8,000
Net Cash from Financing Activities	16,500

Working Notes:

Particulars	Amount (₹)
Balance of Securities Premium	1,60,000
Less:
Utilised for Bonus Shares (15,000 shares of ₹ 10 each)	(1,50,000)
Utilised for Writing off of Underwriting Commission	(10,000)
	NIL

(v) Calculation of Cash from Investing Activities:

Particulars	Amount (₹)
Purchase of Office Equipment (₹ 2,40,000 − ₹ 2,00,000)	(40,000)
Net Cash used in Investing Activities	(40,000)

(vi) The Proposed Dividend by the Directors, ₹ 30,000 for the current year, will be treated as a contingent liability and hence it will have no effect on the Cash Flow Statement.