Deck 16: The Statement of Cash Flows

Question 1

In accordance with IAS 7 Statement of Cash Flows,dividends paid may be classified as an investing or a financing cash flow.

Answer 1

False

Question 2

In accordance with IAS 7 Statement of Cash Flows,cash payments to suppliers for goods and services are classified as cash flows from operating activities.

Answer 2

True

Question 3

To calculate the cash flow from the issue of debentures,the face value of the debentures would have to be adjusted by deducting any premium or adding any discount on issue.

Answer 3

False

Question 4

Entities are encouraged to report their operating cash flows using the direct method.

Question 5

Both IASB and FASB propose that financial statements should be presented in a more aggregated manner.

Question 6

IAS 7 requires disclosures about non-cash financing and investing activities.

Question 7

Accounts that represent cash or cash equivalents include:

A)bank overdrafts.
B)accounts receivable.
C)short-term money market deposits.
D)bank overdrafts and short-term money market deposits.

Question 8

If a business consistently has positive cash flows from financing and negative cash flows from investing and operating activities,this is a positive sign for the business.

Question 9

While the statement of cash flows is presently required along with the accrual statements,taking a balanced view,it would be sufficient to meet the accountability needs of general purpose financial statement users on its own.

Question 10

Investing activities are defined by IAS 7 as those that:

A)relate to the changing size or composition of the capital management structure of the entity.
B)relate to the acquisition or disposal of inventory.
C)relate to the acquisition and/or disposal of non-current assets and other investments not included in cash equivalents.
D)relate to changes in capital or liabilities used to fund long-term assets.

Question 11

The statement of cash flows should be subdivided into selling,financing and investing categories.

Question 12

In accordance with IAS 7,non-cash investing and financing transactions are required to be included in the statement of cash flows.

Question 13

IAS 7 states that for a money market deposit to be classified as cash:

A)It must normally have a maturity of 3 months or less from the date of acquisition.
B)It must be scheduled to mature within the operating cycle of the entity.
C)It must normally mature 3 months or less from balance date.
D)It must be within 1 month of maturing at balance date.

Question 14

Sharma (1996)argues that cash flows from operating activities divided by current debt should replace the current ratio as a measure of liquidity.

Question 15

All cash flows from investing and financing activities are required to be reported on a gross basis.

Question 16

In accordance with IAS 7 Statement of Cash Flows,cash receipts from sales of property,plant and equipment are classified as cash flows from operating activities.

Question 17

A reporting entity is required to prepare a statement of cash flows that is in accordance with the requirements of IAS 7 and shall be presented as an integral part of the notes to the accounts.

Question 18

A statement of cash flows is a forecast of net cash flows from operating,investing and financing activities.

Question 19

An item considered to be a cash equivalent in one company may not be considered as such in another.This is because:

A)The operating cycle varies between companies.
B)Companies have different balance dates and this will affect the measurement of the term to maturity.
C)Companies use highly liquid items for purposes other than as part of their cash-management function.
D)The working capital management policies of companies vary so an item may be considered very liquid in one company and not in another.

Question 20

IAS 7 defines cash equivalents to include:

A)highly liquid investments with short periods to maturity that are readily convertible to cash on hand at the investor's option and are subject to an insignificant risk of changes in value.
B)term borrowing.
C)working capital items such as prepayments and accruals.
D)highly liquid investments with short periods to maturity that are readily convertible to cash on hand at the investor's option and are subject to an insignificant risk of changes in value and term borrowing.

Question 21

Which of the following tables provides an appropriate classification for the items listed for the statement of cash flows for a retailing business?

A) $$\begin{array} { | l | l | l | } \hline \text { Operating } & \text { Investing } & \text { Financing } \\\hline \text { Receipts from customers } & \text { Proceeds from issue of } & \text { Dividends paid } \\\hline \text { Interest paid } & \text { Payment for property, } & \text { Repayment of } \\\hline \text { Borrowing costs } & \text { Payment for subsidiary } & \text { Proceeds from } \\\hline\end{array}$$
B) $$\begin{array} { | l | l | l | } \hline \text { Operating } & \text { Investing } & \text { Financing } \\\hline \text { Receipts from customers } & \text { Dividends received } & \text { Dividends paid } \\\hline \text { Payments to suppliers } & \text { Payment for property, } & \text { Borrowing costs } \\\hline \text { Proceeds from court settlement } & \text { Payment for subsidiary } & \text { Proceeds from } \\\hline\end{array}$$
C) $$\begin{array} { | l | l | l | } \hline \text { Operating } & \text { Investing } & \text { Financing } \\\hline \text { Receipts from customers } & \text { Payment for property, } & \text { Dividends paid } \\\hline \text { Interest paid } & \text { Payment for subsidiary } & \text { Proceeds from issue } \\\hline \text { Borrowing costs } & \text { Proceeds from sale of } & \text { Proceeds from } \\\hline\end{array}$$
D) $$\begin{array} { | l | l | l | } \hline \text { Operating } & \text { Investing } & \text { Financing } \\\hline \text { Receipts from customers } & \text { Proceeds from issue of } & \text { Dividends paid } \\\hline \text { Payments to suppliers } & \text { Payment for property, } & \text { Repayment of } \\\hline \text { Bill discounts received } & \text { Payment for subsidiary } & \text { Interest paid } \\\hline\end{array}$$

Question 22

Up and Away Unlimited provides the following information for the period ended 30 June 2014: $$\begin{array} { | l | r | } \hline & \$ 0 \\\hline \text { Cost of goods sold for the year } & 450 \\\hline \text { Discounts received for early payment to suppliers } & 25 \\\hline \text { Opening balance of trade creditors } & 210 \\\hline \text { Closing balance of trade creditors } & 240 \\\hline \text { Opening balance of inventory } & 111 \\\hline \text { Closing balance of inventory } & 130 \\\hline\end{array}$$ What is the cash paid to suppliers for the period?

A)$376 000
B)$415 000
C)$474 000
D)$426 000

Question 23

Hansard Ltd provides the following information for the period ended 30 June 2015: $\begin{array}{|l|r|}\hline & \$ 0 \\\hline \text { Opening balance plant and equipment } & 200 \\\hline \text { Closing balance plant and equipment } & 227 \\\hline \text { Revalued plant: } & \\\hline \text { Cost } & 169 \\\hline \text { Accumulated depreciation } & 39 \\\hline \text { Revalued to } & 210 \\\hline \text { Cost of plant sold in exchange for services } & 40 \\\hline \text { Plant sold for cash: } & \\\hline \text { Cost } & 20 \\\hline \text { Accumulated depreciation } & 12 \\\hline \text { Cash received } & 10\\\hline\end{array}$ What was the amount of cash used to acquire plant and equipment?

A)$55 000
B)$16 000
C)$23 000
D)$18 000

Question 24

Mistril Ltd provides the following information for the period ended 30 June 2015: $\begin{array}{|l|r|} \hline& \$ 0 \\\hline \text { Interest revenue } & 50 \\\hline \text { Opening balance interest receivable } & 25 \\\hline \text { Closing balance interest receivable } & 15 \\\hline \text { Debentures (asset) discount amortisation } & 6 \\\hline \text { Income tax expense } & 15 \\\hline \text { Opening balance income tax payable } & 29 \\\hline \text { Closing balance income tax payable } & 33 \\\hline \text { Opening balance deferred tax liability } & 9 \\\hline \text { Closing balance deferred tax liability } & 4 \\\hline \text { Dividend revenue } & 6 \\\hline \text { Opening balance of dividend receivable } & 9\\\hline\end{array}$ What are the cash flows from interest,dividends and tax for the period?

A)Cash inflow from interest $34 000; cash inflow from dividends $13 000; cash outflow tax $14 000
B)Cash inflow from interest $54 000; cash inflow from dividends $7000; cash outflow tax $16 000
C)Cash inflow from interest $66 000; cash inflow from dividends $7000; cash outflow tax $6000
D)Cash inflow from interest $84 000; cash inflow from dividends $25 000; cash outflow tax $82 000

Question 25

Items that must be separately disclosed in the statement of cash flows include:

A)cash sourced from derivative instruments.
B)borrowing costs.
C)income taxes paid.
D)borrowing costs and income taxes paid.

Question 26

The following information is provided for Unique Ltd for the period ended 30 June 2015: $\begin{array}{|l|r|}\hline & \$ 0 \\\hline \text { Cost of goods sold for the year } & 930 \\\hline \text { Discounts received for early payment to suppliers } & 60 \\\hline \text { Opening balance of trade creditors } & 160 \\\hline \text { Closing balance of trade creditors } & 250 \\\hline \text { Opening balance of inventory } & 85 \\\hline \text { Closing balance of inventory } & 110 \\\hline\text { Sales for the year }&1,560\\\hline \text { Discounts provided to customers for early payment } & 79 \\\hline \text { Doubtful debts expense } & 38 \\\hline \text { Opening balance of accounts receivable } & 100 \\\hline \text { Closing balance of accounts receivable } & 130 \\\hline \text { Bad debts expense } & 47 \\\hline \text { Opening balance of the provision for doubtful debts } & 115 \\\hline \text { Closing balance of the provision for doubtful debts } & 90 \\\hline \text { Opening balance dividends payable } & 120 \\\hline \text { Closing balance dividends payable } & 80\\\hline\end{array}$ All transactions are in cash unless otherwise indicated.What is the net cash flow from operating activities for the period?

A)Net cash inflow $596 000
B)Net cash inflow $426 000
C)Net cash inflow $536 000
D)Net cash inflow $486 000

Question 27

Railway Corporation provides the following information that relates to the period ended 30 June 2015: $\begin{array}{|l|r|}\hline & \$ 0 \\\hline \text { Sales for the year } & 400 \\\hline \text { Discounts provided to customers for early payment } & 7 \\\hline \text { Bad debts expense } & 10 \\\hline \text { Opening balance of accounts receivable } & 150 \\\hline \text { Closing balance of accounts receivable } & 170\\\hline\end{array}$ What amount of cash was received from customers during the year?

A)$383 000
B)$363 000
C)$403 000
D)$397 000

Question 28

IAS 7 requires that a note to the accounts shall disclose a reconciliation of cash flows from operating activities to operating profit or loss after income tax as reported in the statement of comprehensive income.The correct adjustments to the operating profit/loss after tax include:

A)add; depreciation expense, gain on sale of plant and equipment, increase in interest payable, increase in inventories.
B)subtract; increase in future income tax benefit, increase in accounts receivable, loss on sale of plant and equipment.
C)add; increase in accounts payable, increase in income taxes payable, increase in deferred taxes payable.
D)subtract; amortisation expense, increase in future income benefit, increase in interest payable.

Question 29

Sonic Co Ltd provides the following information for the period ended 30 June 2015: $$\begin{array} { | l | r | } \hline & \$ 0 \\\hline \text { Opening balance loans } & 800 \\\hline \text { Closing balance loans } & 550 \\\hline \text { Opening balance of interest payable } & 120 \\\hline \text { Closing balance of interest payable } & 130 \\\hline \text { Interest expense } & 75 \\\hline \text { Opening balance trade creditors } & 400 \\\hline \text { Opening balance trade creditors } & 600 \\\hline \text { Closing balance of share capital } & 3000 \\\hline \text { Opening balance of dividends payable } & 3900 \\\hline \text { Dlosing balance of dividends payable } & 430 \\\hline \text { Opening balance asset revaluation reserve } & 520 \\\hline \text { Closing balance asset revaluation reserve } & 520 \\\hline \text { Purchase of land for shares with market value of } & 990 \\\hline\end{array}$$ During the period Sonic Co Ltd issued debentures with a face value of $1 000 000 at a premium of $560 000.All transactions are in cash unless otherwise indicated.What is the net cash flow from financing activities for the period?

A)Net cash outflow $480 000
B)Net cash outflow $290 000
C)Net cash inflow $270 000
D)Net cash inflow $1 080 000

Question 30

Heady Ltd provides the following information for the period ended 30 June 2014: $\begin{array}{|l|r|} \hline& \$ 0 \\\hline \text { Opening balance loans } & 200 \\\hline \text { Closing balance loans } & 450 \\\hline \text { Opening balance of interest payable } & 90 \\\hline \text { Closing balance of interest payable } & 84 \\\hline \text { Interest expense } & 10 \\\hline \text { Opening balance of retained earnings } & 670 \\\hline \text { Closing balance of retained earnings } & 710\\\hline \text { Opening balance of share capital } & 6000 \\\hline \text { Closing balance of share capital } & 6890 \\\hline \text { Opening balance of dividends payable } & 540 \\\hline \text { Closing balance of dividends payable } & 600 \\\hline \text { Dividends proposed (statement of comprehensive income) } & 600 \\\hline \text { Opening balance asset revaluation reserve } & 740 \\\hline \text { Closing balance asset revaluation reserve } & 900 \\\hline \text { Purchase of land for shares with market value of } & 890\\\hline\end{array}$ During the period Sonic Co Ltd issued debentures with a face value of $2 000 000 at a discount of $260 000.All transactions are in cash unless otherwise indicated.What is the net cash flow from financing activities for the period?

A)Net cash outflow $1 450 000
B)Net cash outflow $6000
C)Net cash inflow $1 154 000
D)Net cash inflow $1 390 000

Question 31

Jaunty Ltd provides the following information for the period ended 30 June 2015: $\begin{array}{|l|lr|} \hline&{\text { \$0 }} \\\hline \text { Opening balance plant and equipment } & 1010 \\\hline \text { Closing balance plant and equipment } & 1220 \\\hline \text { Depreciation expense for the year } & & 87 \\\hline \text { Opening balance of accumulated depreciation } & & 400\\\hline \text { Closing balance of accumulated depreciation } & \\\hline \text { Loss on sale of plant and equipment for } \$ 90000 \text { cash } & \\\hline \text { Opening balance of land } & 2500 \\\hline \text { Closing balance of land } & 3900 \\\hline \text { Revaluation of land } & \\\hline \text { Carrying value } & 1000 \\\hline \text { Revalued to } & 1800 \\\hline\text { Purchase of land for shares with market value of }&100\\\hline\end{array}$ All transactions are in cash unless otherwise indicated.What is the net cash flow from investing activities?

A)Net cash outflow $770 000
B)$0
C)Net cash inflow $230 000
D)Net cash outflow $860 000

Question 32

The following information is provided for Identikit Ltd for the period ended 30 June 2015: $\begin{array}{|l|r|} \hline& \$ 0 \\\hline \text { Cost of goods sold for the year } & 460 \\\hline \text { Discounts received for early payment to suppliers } & 40 \\\hline \text { Opening balance of trade creditors } & 100 \\\hline \text { Closing balance of trade creditors } & 120 \\\hline \text { Opening balance of inventory } & 78 \\\hline \text { Closing balance of inventory } & 160 \\\hline \text { Sales for the year } & 1200 \\\hline \text { Discounts provided to customers for early payment } & 120 \\\hline \text { Sales returns } & 120 \\\hline \text { Opening balance of accounts receivable } & 300 \\\hline \text { Closing balance of accounts receivable } & 270 \\\hline \text { Bad debts expense } & 65 \\\hline \text { Opening balance of tax payable } & 30 \\\hline \text { Closing balance of tax payable } & 15 \\\hline \text { Tax expense } & 27 \\\hline \text { Interest expense } & 73\\\hline\end{array}$ All transactions are in cash unless otherwise indicated.What is the net cash flow from operating activities for the period?

A)Cash inflow $371 000
B)Cash inflow $298 000
C)Cash outflow $554 000
D)Cash inflow $530 000

Question 33

Mogull Ltd provides the following information for the period ended 30 June 2015: $\begin{array}{|l|r|}\hline & \$ 0 \\\hline \text { Interest expense } & 80 \\\hline \text { Opening balance interest payable } & 30 \\\hline \text { Closing balance interest payable } & 45 \\\hline \text { Debentures (liability) premium amortisation } & 2 \\\hline \text { Income tax expense } & 18 \\\hline \text { Opening balance income tax payable } & 6 \\\hline \text { Closing balance income tax payable } & 9 \\\hline \text { Opening balance deferred tax asset } & 5 \\\hline \text { Closing balance deferred tax asset } & 8 \\\hline \text { Dividend revenue } & 19 \\\hline \text { Opening balance of dividend receivable } & 8 \\\hline \text { Closing balance of dividend receivable } & 7\\\hline\end{array}$ What are the cash flows from interest,dividends and tax for the period?

A)Cash outflow from interest $97 000; cash inflow from dividends $18 000; cash outflow tax $24 000
B)Cash outflow from interest $67 000; cash inflow from dividends $20 000; cash outflow tax $12 000
C)Cash outflow from interest $63 000; cash inflow from dividends $4000; cash outflow tax $18 000
D)Cash outflow from interest $7000; cash inflow from dividends $20 000; cash outflow tax $16 000

Question 34

Joplyn Ltd provides the following information for the period ended 30 June 2015: $\begin{array}{|l|r|}\hline & \$ 0 \\\hline \text { Opening balance plant and equipment } & 800 \\\hline \text { Closing balance plant and equipment } & 830 \\\hline \text { Depreciation expense for the year } & 90 \\\hline \text { Opening balance of accumulated depreciation } & 200 \\\hline \text { Closing balance of accumulated depreciation } & 260 \\\hline \text { Profit on sale of plant and equipment for } \$ 100000 \text { cash } & 110 \\\hline \text { Opening balance of land } & 160 \\\hline \text { Closing balance of land } & 160 \\\hline \text { Revaluation of land } & \\\hline \text { Carrying value } & 40 \\\hline \text { Revalued to } & 60 \\\hline\text { Purchase of land for shares with market value of }&80\\\hline\end{array}$ All transactions are in cash unless otherwise indicated.What is the net cash flow from investing activities?

A)Cash inflow $80 000
B)Cash inflow $30 000
C)Cash outflow $100 000
D)$0

Question 35

Cod Ltd provides the following information for the period ended 30 June 2014: $\begin{array}{|l|r|}\hline & \$ 0 \\\hline \text { Cost of goods sold for the year } & 110 \\\hline \text { Discounts received for early payment to suppliers } & 82 \\\hline \text { Wages } & 62 \\\hline \text { Opening balance of trade creditors } & 40 \\\hline \text { Closing balance of trade creditors } & 45 \\\hline \text { Opening balance of inventory } & 30 \\\hline \text { Closing balance of inventory } & 15\\\hline\end{array}$ What is the cash paid to suppliers for the period?

A)$82 000
B)$144 000
C)$184 000
D)$122 000

Question 36

Where the entity uses the direct method a note to the accounts reconciling cash flows from operating activities to net profit is required because:

A)Complex calculations are required to convert cash-based revenues.
B)Items such as depreciation are only recorded in a cash system and not an accrual system.
C)There is likely to be a disparity between cash flows from operations under IAS 7 and the profits reported in the statement of comprehensive income.
D)The direct method is required under IAS 7.

Question 37

Hybrid Ltd provides the following information for the period ended 30 June 2015: $\begin{array}{|l|r|} \hline & \$ 0 \\\hline \text { Opening balance plant and equipment } & 1000 \\\hline \text { Closing balance plant and equipment } & 1203 \\\hline \text { Revalued plant: } &\\\hline \text { Cost } & 100 \\\hline \text { Accumulated depreciation } & 15 \\\hline \text { Revalued to } & 153 \\\hline\text { Plant purchased in exchange for services with fair value of }&30\\\hline\text { Plant sold for cash: }\\\hline \text { Cost } & 400 \\\hline \text { Accumulated depreciation } & 250 \\\hline \text { Cash received } & 200 \\\hline\end{array}$ What was the amount of cash used to acquire plant and equipment?

A)$626 000
B)$114 000
C)$520 000
D)$270 000

Question 38

Mopoke Ltd provides the following information that relates to the period ended 30 June 2014: $$\begin{array} { | l | r | } \hline & \$ 0 \\\hline \text { Dales for the year } & 1200 \\\hline \text { Discounts provided to customers for early payment } & 500 \\\hline \text { Doubtful debts expense } & 150 \\\hline \text { Opening balance of accounts receivable } & 300 \\\hline \text { Closing balance of accounts receivable } & 900 \\\hline \text { Bad debts expense } & 20 \\\hline \text { Opening balance of the provision for doubtful debts } & 20 \\\hline \text { Closing balance of the provision for doubtful debts } & 10 \\\hline\end{array}$$ What amount of cash was received from customers during the year?

A)$1 780 000
B)$930 000
C)$1 720 000
D)$920 000

Question 39

What method does IAS 7 encourage for the reporting of cash flows from operating activities and what does it mean for the presentation of this category in the statement of cash flows?

A)The derivative method is required.This means that the amounts are presented as increases or decreases in balance sheet working capital accounts.
B)The indirect method is required.This means that the cash flows are presented as accrual amounts from the operating section of the statement of comprehensive income adjusted for non-cash effects.
C)The direct method is required.This means that the gross cash flows from operating items are presented.
D)Either the derivative or the direct method is required.For the derivative method this means that the amounts are presented as increases or decreases in the statement of financial position or for the direct method, this means that the gross cash flows from operating items presented is permitted

Question 40

DryGrass Ltd provides the following information that relates to the period ended 30 June 2015: $\begin{array}{|l|r|}\hline & \$ 0 \\\hline \text { Sales for the year } & 780 \\\hline \text { Discounts provided to customers for early payment } & 65 \\\hline \text { Bad debts expense } & 20 \\\hline \text { Opening balance of accounts receivable } & 330 \\\hline \text { Closing balance of accounts receivable } & 250 \\\hline \text { Sales returns } & 35 \\\hline\end{array}$ What amount of cash was received from customers during the year?

A)$775 000
B)$580 000
C)$740 000
D)$615 000

Question 41

Which combination is the appropriate operation to perform to the following accounts to reconcile net profit with net cash flows from operating activities?

A) $$\begin{array} { | l | l | l | } \hline \text { Increase in inventories } & \text { Decrease in trade creditors } & \text { Increase in accrued expenses } \\\hline \text { add } & \text { subtract } & \text { subtract } \\\hline\end{array}$$
B) $$\begin{array} { | l | l | l | } \hline \text { Increase in inventories } & \text { Decrease in trade creditors } & \text { Increase in accrued expenses } \\\hline \text { add } & \text { add } & \text { subtract } \\\hline\end{array}$$
C) $$\begin{array} { | l | l | l | } \hline \text { Increase in inventories } & \text { Decrease in trade creditors } & \text { Increase in accrued expenses } \\\hline \text { subtract } & \text { subtract } & \text { add } \\\hline\end{array}$$
D) $$\begin{array} { | l | l | l | } \hline \text { Increase in inventories } & \text { Decrease in trade creditors } & \text { Increase in accrued expenses } \\\hline \text { subtract } & \text { add } & \text { subtract } \\\hline\end{array}$$

Question 42

Swans Machinery Plc reported a net profit of £3 000 000 for the year ended 30 June 2014.The following changes occurred in the statement of financial position: $$\begin{array} { | l | r | } \hline & \begin{array} { c } \text { Increase } \\\text { (decrease) }\end{array} \\\hline \text { Equipment } & 250000 \\\hline \text { Accumulated depreciation } & 400000 \\\hline \text { Note payable } & 300000 \\\hline\end{array}$$ Additional information:
During the year Swans Plc sold equipment with a cost of £250 000 and had accumulated depreciation of £120 000 for a gain of £50 000.
On 30 June 2014 Swans Plc purchased equipment costing £500 000 with £200 000 in cash and a note payable for £300 000.
Depreciation expense for the year was £520 000
What is the amount of net cash from operating activities and net cash used in investing activities respectively for the year ended 30 June 2014?

A)£3 470 000; (£20 000)
B)£3 520 000; (£20 000)
C)£3 470 000; (£200 000)
D)$3 520 000; ($500 000)

Question 43

Traditional financial ratios such as the current ratio or acid-test ratios have come in to question as it is argued that they do not monitor the organisation's:

A)profitability.
B)going concern.
C)liquidity.
D)wealth.

Question 44

Bulldogs Plc had the following activities related to their financial operations:
Paid €1 125 000 for the early retirement of convertible notes (amortised cost of €1 110 000)
Paid cash dividends of €93 000.Preference shares with carrying amount of €120 000 were converted to ordinary shares.
What is net cash used in financing activities for the year ended 30 June 2014?

A)(€1 017 000)
B)(€1 032 000)
C)(€1 125 000)
D)(€1 218 000)

Question 45

Lions Plc engaged in the following activities for the year ended 30 June 2014:
Sold shares in Kangaroo Plc for €70 000.The investment had a carrying amount of €66 000.
Purchased shares in Cats Plc for €52 000
Purchased government bonds for €100 000
Issued Lions Plc shares for €100 000
What is the net cash flow used in investing activities?

A)€18 000
B)(€18 000)
C)(€148 000)
D)(€82 000)

Question 46

Following are cash flow transactions for Cootamundra PlC: $\begin{array}{|l|l|}\hline \text { I } & \text { Interest paid } \\\hline \text { II } & \text { Interest received } \\\hline \text { III } & \text { Dividends paid } \\\hline \text { IV } & \text { Dividends received } \\\hline \text { V } & \text { Purchase of property plant and equipment } \\\hline \text { VI } & \text { Proceeds from issue of shares }\\\hline\end{array}$ Which of the following combinations includes all transactions that may by classified under investing activities of Cootamundra Plc that are in accordance with IAS 7 Statement of Cash Flows?

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

Question 47

It is currently argued that the presentation of the various financial statements lack:

A)cohesiveness
B)understanding
C)clarity
D)flexibility

Question 48

When creating a statement of cash flows certain items must be disclosed separately because of their significance,including:

A)discounts received from suppliers.
B)interest, both received and paid.
C)discounts received from suppliers, and interest both received and paid.
D)interest and tax payments.

Question 49

Saints Plc is preparing a statement of cash flows for the year ended 30 June 2014.You are the accountant of the entity and have collected the following data: $\begin{array}{|l|r|}\hline \text { Gain on sale of equipment } & 12,000 \\\hline \text { Proceeds from sale of equipment } & 20,000 \\\hline \text { Purchase of government bonds (dated 30 June 2014, face value of } \$ 400,000) & 360,000 \\\hline \text { Dividends declared } & 90,000 \\\hline \text { Dividends paid } & 76,000 \\\hline \text { Proceeds from issue of share capital } & 150,000\\\hline\end{array}$ What is the amount of net cash used in investing and financing activities respectively?

A)£20 000; (£286 000)
B)£(340 000); £74 000
C)£(348 000); (£22 000)
D)£(380 000); £74 000

Question 50

Walter (1987)claimed that 'one of the strongest antidotes to creative accounting is a requirement for statement of cash flows to have '.

A)previous year comparisons
B)disclosures
C)details of transactions
D)details of key accounts

Question 51

Which of the following statements is correct in accordance with IAS 7 Statement of Cash Flows?

A)Cash repayments of amounts borrowed are classified under financing activities.
B)Cash proceeds from issuing equity instruments are classified under financing activities.
C)Cash payments to acquire property, plant and equipment are classified under investing activities.
D)Cash advances and loans made to other parties are classified under investing activities.

Question 52

Which of the following statements is not in accordance with IAS 7 Statement of Cash Flows?

A)The statement of cash flows shall report cash flows during the period classified by operating, investing and financing activities.
B)Investing and financing transactions that do not require the use of cash or cash equivalents shall be excluded from a statement of cash flows.
C)Investing and financing activities that do not have a direct impact on current cash flows but affect the capital and asset structure of an entity should be included in the statement of cash flows.
D)Cash flows arising from taxes on income shall be separately disclosed and shall be classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities.

Question 53

In accordance with IAS 7,what is the appropriate classification for the conversion of preference shares to ordinary shares?

A)inflow in investing activity
B)inflow in financing activity
C)non-cash investing item
D)non-cash financing item

Question 54

Sharma (1996)suggests that a cash-flow based measure of retained cash flows from operations (RCFFO)may be an important indicator of financial flexibility.How is RCFFO measured?

A)the level of cash retained, calculated by deducting net cash flows from investing from the net cash flows from operations.
B)the level of cash retained after meeting all operating costs and priority payments such as interest costs and dividends.
C)the level of cash retained after meeting all operating costs and deducting or adding as appropriate the cash flows from financing and investing activities.
D)the level of cash retained, calculated by deducting net cash flows from financing from the net cash flows from operations.

Question 55

Following are the cash flow transactions for Wadonga PlC: $\begin{array}{|l|l|}\hline \text { I } & \text { Non-cash items } \\\hline \text { II } & \text { Cash proceeds from suppliers } \\\hline \text { III } & \text { Payment of debentures } \\\hline \text { IV } & \text { Proceeds from issue of a convertible note } \\\hline \text { V } & \text { Purchase of property plant and equipment } \\\hline \text { VI } &\text { Proceeds from issue of ordinary shares }\\\hline\end{array}$ Which of the following combinations includes all of the transactions that will determine cash flows from financing activities of Wadonga Plc that are in accordance with IAS 7 Statement of Cash Flows?

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

Question 56

Which of the following would not be an operating activity cash outflow?

A)taxes paid
B)acquisition of goods and services
C)acquisition of intangible assets
D)employee benefits paid

Question 57

The following are cash flow transactions for Mungo PlC: $\begin{array}{|l|l|}\hline \text { I } & \text { Changes in inventories } \\\hline \text { II } & \text { Changes in operating receivables } \\\hline \text { III } & \text { Non-cash items } \\\hline \text { IV } & \text { Changes in operating payables } \\\hline \text { V } & \text { Purchase of property plant and equipment } \\\hline \text { VI } & \text { Issue of ordinary shares }\\\hline\end{array}$ Which of the following combinations includes all of the transactions that will determine cash flows from operating activities of Mungo Plc that are in accordance with IAS 7 Statement of Cash Flows?

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

Question 58

Crows Plc's books show the following information for the preparation of its statement of cash flows for the year ended 30 June 2014: $\begin{array}{|l|r|r|}\hline & 30 \text {-Jun-13 } & 30 \text {-Jun-14 } \\\hline \text { Accounts receivable } & 69000 & 8700 \\\hline \text { Allowance for doubtful debts } & 2400 & 3000 \\\hline \text { Prepaid rent } & 37200 & 24600 \\\hline \text { Accounts payable } & 58200 & 67200 \\\hline \text { Net profit for the year } & & 450000\\\hline\end{array}$ What is the amount of net cash from operating activities for the year ended 30 June 2014?

A)£445 800
B)£453 600
C)£454 200
D)£489 000

Question 59

Which combination is the appropriate operation to perform to the following accounts to reconcile net profit with net cash flows from operating activities?

A) $$\begin{array} { | l | l | l | } \hline \text { Decrease in inventories } & \text { Decrease in deferred tax assets } & \text { Increase in accounts receivable } \\\hline \text { add } & \text { subtract } & \text { subtract } \\\hline\end{array}$$
B) $$\begin{array} { | l | l | l | } \hline \text { Decrease in inventories } & \text { Decrease in deferred tax assets } & \text { Increase in accounts receivable } \\\hline \text { add } & \text { add } & \text { subtract } \\\hline\end{array}$$
C) $$\begin{array} { | l | l | l | } \hline \text { Decrease in inventories } & \text { Decrease in deferred tax assets } & \text { Increase in accounts receivable } \\\hline \text { subtract } & \text { subtract } & \text { add } \\\hline\end{array}$$
D) $$\begin{array} { | l | l | l | } \hline \text { Decrease in inventories } & \text { Decrease in deferred tax assets } & \text { Increase in accounts receivable } \\\hline \text { subtract } & \text { add } & \text { subtract } \\\hline\end{array}$$

Question 60

The following are cash flow transactions for Greenfell PlC: $\begin{array}{|l|l|}\hline \text { I } & \text { Depreciation and amortisation } \\\hline \text { II } & \text { Impairment loss } \\\hline \text { III } & \text { Issue of bonus shares } \\\hline \text { IV } & \text { Conversion of debt to equity } \\\hline V & \text { Purchase of property plant and equipment } \\\hline V I & \text { Dividend reinvestment }\\\hline\end{array}$ Which of the following combinations includes all the non-cash investing and financing transactions of Greenfell Plc that are required to be disclosed in the notes to the accounts as per IAS 7 Statement of Cash Flows?

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

Question 61

Identify and discuss the three classifications of the statement of cash flows.

Question 62

Discuss the potential limitations of the statement of cash flows.

Question 63

Explain how the form and content of the statement of cash flow could change as a result of a joint project by the IASB and the US Financial Accounting Standards Board (FASB)investigating the presentation of financial statements.

Question 64

Describe the application of IAS 7 to interest and dividends received.

Question 65

'Cash flows from operations would seem to provide a reasonable guide to the ability of a firm to service debt'.Discuss.

Question 66

Discuss the treatment of interest and dividends in accordance with IAS 7 Statement of Cash Flows.

Question 67

Explain why IAS 7 requires disclosures to be made about non-cash financing and investing activities.

Question 68

Discuss the differences between the direct and indirect methods when reporting cash flows from operating activities.

Question 69

Discuss the terms 'cash' and 'cash equivalents' as they apply to a statement of cash flows.