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Question 2 Shown below are the statements of financial position of Folk Ltd for the past two years and the company's most recent statement of profit or loss: Statement of Profit or Loss for the year to 31 October 2020 000 Revenue 33,600 Cost of Sales (18.480) Gross profit 15,120 Gain on disposal of property plant and equipment 336 Distribution costs (7,056) Administrative expenses (3,360) Finance costs - interest on loans (136.50) Profit before tax 4,903.50 Tax expense (2016) Profit for the year 2.887 50 Statements of Financial Position at 31 October 2020 000 2019 000 000 000 37,756.50 36,150 5,544 3,696 Assets Non-current assets Property, plant and equipment at cost Current Assets Inventories Trade and other receivables Cash and cash equivalents Total assets Equity Share capital Share premium account Retained earnings 5,040 . 3,696 193.50 10,584 48.340,50 7.585 50 43.735.50 3,300 1,200 37485 41,985 3.000 750 34 59750 38,347.50 1,950 1,200 Liabilities Non-current liabilities Bank loans Current liabilities Trade and other payables Current tax liability Bank overdraft Total equity and liabilities 1,848 2,016 2.772 1.416 541.50 4,405.50 48,340.50 4.188 43.735.50 Question 2 continues on the next page Question 2 continued The following information is also available: 1) The total depreciation charge for the year was 5,317,500. 2) Property, plant and equipment costing 1,464,000 with accumulated depreciation of 532,500 was sold during the year at a profit of 336,000. 3) All sales and purchases were on credit. Other expenses were paid for in cash. 4) No dividends were paid during the year. Required: a) Prepare a statement of cash flows for Folk Ltd for the year to 31 October 2020 in accordance with the requirements of accounting standard IAS7 and using the indirect method. [18 marks] b) Explain the direct method and the indirect method of calculating the amount of cash generated from operating activities of the businesses, [7 marks] [Total 25 marks)

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