Deck 17: Statement of Cash Flows

Question 1

For operating cash flows, the presentation method that separates gross cash inflows from cash outflows is the:

A) equity method.
B) offset method.
C) direct method.
D) indirect method.

Answer 1

C

Question 2

Financing activities on an entity's statement of cash flows are usually associated with:

A) disposal of non-current assets.
B) purchase on shares by the entity.
C) sales of goods and services by the entity.
D) movements in non-current liabilities and equity.

Answer 2

D

Question 3

Bamboo Co. Limited had a profit after tax of $75 000 for the financial year. Included in this profit was: Depreciation expense of $22 000
Gain on sale of investments of $6 000
Also, accounts receivable increased by $26 000 and inventories decreased by $8 000. The cash flow from operating activities during the year was:

A) $48 000
B) $73 000
C) $78 000
D) $82 000

Answer 3

B

Question 4

Bank borrowings are normally classified in the statement of cash flows as:

A) financing activities, except for bank overdrafts that are repayable on demand.
B) financing activities, except for bank overdrafts that are repayable on demand and which form an integral part of an entity's cash management.
C) operating activities, except for bank overdrafts that are repayable on demand and which form an integral part of an entity's cash management.
D) investing activities, except for bank overdrafts that are repayable on demand and which form an integral part of an entity's cash management.

Question 5

Investing activities are those relating to:

A) the acquisition or disposal of non-current assets.
B) changing the size or financial structure of an entity.
C) altering the composition of the debt of an organisation.
D) restructuring the working capital components of a business.

Question 6

The following information was extracted from the records of Vincent Limited: Opening balance of machinery: $840 000
Closing balance of machinery: $960 000
Cost of new machinery: $240 000
Proceeds from sale of machinery: $48 000
(Cost $120 000; Carrying amount $40 000)
The total cash flows from investing activities is determined as:

A) $48 000 cash inflow.
B) $240 000 cash outflow.
C) $192 000 cash outflow.
D) $288 000 cash inflow.

Question 7

Which of the following items is classified as part of 'operating activities' in the statement of cash flows?

A) Bad debts expense.
B) Depreciation of non-current assets.
C) Proceeds from the sale of non-current assets.
D) Payments to suppliers for the purchase of goods.

Question 8

Which of the following cash flow activities are regarded as investing cash flows?

A) interest paid.
B) income taxes paid.
C) acquisition of subsidiary net of cash acquired.
D) proceeds from issue of debentures.

Question 9

Which of following is classified as part of 'investing activities' in the statement of cash flows?

A) gain on sale of investments.
B) depreciation of non-current assets.
C) proceeds from an issue of shares.
D) acquisition of non-current assets.

Question 10

In accordance with AASB 107/IAS 7 Statement of Cash Flows, investing and financing transactions that do not require the use of cash or cash equivalents should be:

A) excluded from a statement of cash flows.
B) presented in a statement of cash flows before operating, investing and financing activities.
C) presented in a statement of cash flows after the operating, investing and financing activities.
D) presented in a statement of cash flows after operating activities and before investing and financing activities.

Question 11

Which of the following items is classified as a 'financing activity' in the statement of cash flows?

A) cash received from accounts receivable.
B) cash payment to purchase debentures of another entity.
C) cash payment on redemption of the company's debentures.
D) payment of dividends through a dividend reinvestment scheme.

Question 12

The basis of measurement used in the statement of cash flows is:

A) accrual.
B) current value.
C) net present value.
D) cash and cash equivalents.

Question 13

A company reported the following information for a financial year: $\begin{array}{lr}\text { Profit from ordinary activities before incometax expense } & 264000 \\\text { Income tax expense } & 70000 \\\text { Depreciation expense } & 24000 \\\text { Issue of shares } & 120000 \\\text { Loan made to another company } & 24000 \\\text { Increase in accounts receivable } & 8000 \\\text { Decrease in inventories } & 12000 \\\text { Cash received from loans receivable } & 4000 \\\text { Dividends paid } & 16000\end{array}$ What is the net cash inflow (outflow) from investing activities?

A) $4 000 net cash inflow.
B) $24 000 net cash inflow.
C) $(20 000) net cash outflow.
D) $(24 000) net cash outflow.

Question 14

According to AASB 107/IAS 7 Statement of Cash Flows, which of the following items does not fall within the definition of cash?

A) Accounts receivable.
B) Bank notes and coins.
C) Non-bank bills that are readily convertible to cash.
D) Deposits on the short-term money market with a term of less than 3 months.

Question 15

Operating activities on a statement of cash flows are generally associated with:

A) changes in equity of an entity.
B) revenues and expenses of an entity.
C) acquisitions of non-current assets of an entity.
D) movements in non-current liabilities of an entity.

Question 16

For cash flow reporting purposes, operating activities include:

A) acquisition and disposal of investments.
B) buying and selling of non-current assets.
C) incurring and extinguishing equity and debt.
D) those not otherwise classified as financing and investing.

Question 17

An item or transaction will qualify for classification as a cash equivalent:

A) only if it has a maturity of less than three months.
B) only if its term to maturity is no greater than twelve months.
C) only if it has a fixed maturity date of greater than twelve months.
D) only if its term to maturity is no greater than twenty-four months.

Question 18

Which of the following cash flows may be reported on a net basis?

A) cash receipts and payments for items in which the turnover is quick, the amounts small, and the maturities are short.
B) cash receipts and payments for items in which the turnover is slow, the amounts are large, and the maturities are short.
C) cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are long-term.
D) cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short.

Question 19

Which of the following cash flows may be reported on a net basis by a financial institution?
I. Cash payments and receipts for the acceptance and repayment of deposits with a fixed maturity date.
II. Cash receipts and payments for the acceptance and repayment of deposits with no fixed maturity date.
III. The placement of deposits with and withdrawal of deposits from other financial institutions.
IV. Cash advances and loans made to customers and the repayment of those advances and loans.

A) I, II and IV.
B) II, III and IV.
C) I, III and IV.
D) I, II and III.

Question 20

Flash Limited had the following cash flows during the reporting period: Purchase of intangibles $80 000
Proceeds from sale of plant $36 000
Receipts from customers $853 000
Payments to suppliers $696 000
Interest received $ 36 500
Income taxes paid $57 000
The net cash flows from operating activities was:

A) $220 000
B) $136 500
C) $187 000
D) $193 500

Question 21

A company reported the following information for a financial year: $\begin{array}{lr}\text { Profit from ordinary activities before incometax expense } & 264000 \\\text { Income tax expense } & 70000 \\\text { Depreciation expense } & 24000 \\\text { Issue of shares } & 120000 \\\text { Loan made to another company } & 24000 \\\text { Increase in accounts receivable } & 8000 \\\text { Decrease in inventories } & 12000 \\\text { Cash received from loans receivable } & 4000 \\\text { Dividends paid } & 16000\end{array}$ What is the net cash inflow from operating activities?

A) $166 000.
B) $222 000.
C) $236 000.
D) $292 000.

Question 22

The components of cash and cash equivalents:

A) must be disclosed and reconciled to amounts reported in the statement of financial position.
B) must be disclosed and reconciled to amounts reported in the statement of changes in equity.
C) may be disclosed at the option of the entity and reconciled to amounts reported in the statement of financial position.
D) must be disclosed and reconciled to amounts reported in the statement of profit or loss and other comprehensive income.

Question 23

Which of the following items is required to be presented in a statement of cash flows?

A) Depositing cash on hand in the bank account.
B) Payment of dividends through a share investment scheme.
C) Proceeds from the issue of debentures.
D) Acquisition of an investment in a subsidiary for consideration consisting of an exchange of non-current assets and liabilities.

Question 24

AASB 107/IAS 7 does not require, but encourages, the disclosure of:
I. The name(s) of the entity's bankers.
II. The aggregate amount of cash flows that represent increases in operating capacity separately from those cash flows that are required to maintain operating capacity.
III. The amount of the cash flows arising from the operating, investing and financing activities of each reportable segment.
IV. The amount of undrawn borrowing facilities that may be available for future operating activities and to settle capital commitments, indicating any restrictions on the use of these facilities.

A) I, II and IV.
B) I, III and IV.
C) II, III and IV.
D) I, II and III.

Question 25

During the financial year Delilah Limited had sales of $284 000. The opening balance of accounts receivable was $36 000, and the closing balance was $45 000. Bad debts amounting to $2 600 were written off during the period. The cash receipts from sales during the year amounted to:

A) $272 400
B) $275 000
C) $281 400
D) $284 000

Question 26

During the financial year Marina Limited had sales of $840 000. The opening balance of accounts receivable was $66 000, and the closing balance was $78 000. Bad debts amounting to $8 000 were written off during the period. The cash receipts from customers during the year amounted to:

A) $820 000
B) $828 000
C) $840 000
D) $860 000

Question 27

Atkins Limited classifies interest paid and interest received as operating activities. Atkins Limited had the following cash flows during the reporting period: Consideration paid to acquire a subsidiary, net of cash acquired $150 000
Dividends paid $30 000
Repayment of borrowings $60 000
Interest paid on borrowings $24 000
Proceeds from sale of plant $100 000
The amount of the cash flows in relation to financing activities of Atkins Limited for the reporting period is:

A) Net cash inflow $90 000.
B) Net cash outflow $90 000.
C) Net cash inflow $30 000.
D) Net cash outflow $30 000.

Question 28

Which of the following items must be separately disclosed in the statement of cash flows?
I. Interest paid
II. Dividends paid
III. Interest received
IV. Dividends received
V. Auditor's remuneration paid

A) II, III and IV only.
B) I, II and V only.
C) II, III, IV and V only.
D) I, II, III and IV only.

Question 29

During the financial year, Jacaranda Limited had a cost of sales amounting to $260 000. Opening and ending balances of related accounts were: $\begin{array}{lcc} & \text { Opening balance } & \text { Closing balance } \\\text { Inventories } & \$ 68000 & \$ 84000 \\\text { Accounts Payable } & \$ 102000 & \$ 112000\end{array}$
A discount of $8 000 for prompt payment was received. The amount of cash paid for goods purchased during the year was:

A) $260 000.
B) $270 000.
C) $286 000.
D) $258 000.

Question 30

A company reported the following information for a financial year: $\begin{array}{lr}\text { Profit from ordinary activities before incometax expense } & 264000 \\\text { Income tax expense } & 70000 \\\text { Depreciation expense } & 24000 \\\text { Issue of shares } & 120000 \\\text { Loan made to another company } & 24000 \\\text { Increase in accounts receivable } & 8000 \\\text { Decrease in inventories } & 12000 \\\text { Cash received from loans receivable } & 4000 \\\text { Dividends paid } & 16000\end{array}$ What is the net cash inflow (outflow) from financing activities?

A) $104 000 net cash inflow.
B) $120 000 net cash inflow.
C) $124 000 net cash inflow.
D) $(16 000) net cash outflow.