Question

Sony Ltd. provides you the following information. Calculate Cash flows from financing activities:

Particulars	31st March, 2023 (₹)	31st March, 2022 (₹)
Equity Share Capital	12,50,000	10,00,000
8% Preference Share Capital	2,00,000	-
10% Debentures	-	3,00,000
Investment in Shares	1,50,000	1,00,000

Additional Information:

1. During the year 2022-23, Sony Ltd. issued bonus shares in the ratio of 1 : 4 by capitalising reserve.
2. 10% Debentures were redeemed on 1^st January, 2023, at a premium of 5%.
3. Preference Shares were issued on 1^st October, 2022. Preference Dividend was paid for half year.
4. Dividend received on Investments ₹ 10,000.

Answer 1

Cash Flows from Financing Activities for the year ended 31st March, 2023.
Particulars	Amount (₹)	Amount (₹)
Proceeds from Issue of Preference Shares		2,00,000
Less:
Redemption of Debentures at Premium	(3,15,000)
Interest on Debentures Paid	(22,500)
Preference Dividend Paid	(8,000)	(3,45,000)
Net Cash Used in Financing Activities		(1,45,500)

Working Note 1: Calculation of Bonus Issue Adjustment (Non-Cash).

Ratio = 1 : 4 on ₹ 10,00,000

Thus, Bonus shares = ₹ 2,50,000

No cash inflow. So, the entire ₹ 2,50,000 increase in Equity Capital is a bonus.

Working Note 2: Calculation of Redemption of 10% Debentures.

Fully redeemed = ₹ 3,00,000

At 5% premium = ₹ 15,000

Thus, Cash Outflow = ₹ 3,00,000 + ₹ 15,000

= ₹ 3,15,000

Working Note 3: Calculation of Dividend on Preference Shares.

For 6 months (October–March):

= `"₹ 2,00,000" xx 8% xx 6/12`

= ₹ 8,000

Thus, Cash Outflow = ₹ 8,000

Working Note 4: Calculation of Debenture Interest (up to 1 Jan 2023).

= `"₹ 3,00,000" xx 10% xx 9/12`

= ₹ 22,500