Deck 7: Consolidated Cash Flow Statements

Question 1

Cash flow from operating activities is the default classification in a statement of cash flows.

Answer 1

True

Question 2

A Ltd acquires 100% of shares of B Ltd for $195 000,financed by an issue of 100 000 x $1.50 shares and $45 000 cash.B Ltd has cash balances of $35 000 at the date of acquisition.Which amount will A Ltd record for cash flow from investing in its consolidated statement of cash flows?

A) ($195 000)
B) ($450 000)
C) ($10 000)
D) ($35 000)

Answer 2

C

Question 3

The carrying amount of property,plant and equipment is $1000 at the start of the year and $1400 at the end of the year.During the year,the following occurred: Sale of equipment-carrying amount $40
Acquisition of equipment-financed by share issue $200
Depreciation expense for year-$120
Investing cash flow is:

A) ($400).
B) ($200).
C) ($160).
D) ($360).

Answer 3

D

Question 4

AASB 107 requires the use of the direct method of calculating cash flows from operating activities.

Question 5

Which of the following items must be separately disclosed in a statement of cash flows?

A) Interest paid and received
B) Dividends paid and received
C) Both A and B
D) No separate disclosure required

Question 6

The issue of shares to purchase non-current assets will be disclosed:

A) as a financing activity.
B) as an investment activity.
C) as both a financing and investment activity.
D) in the note disclosure to the statement of cash flows.

Question 7

Discuss the basis of classifying cash flows arising from interest paid.

Question 8

Why is cash flow from operating activities seen as a performance measure?

Question 9

Accounting Standard AASB 107 Statement of Cash Flows mandates the provision of cash flow information from operating,financing and investing activities.

Question 10

Cash flows from operating activities can be calculated using:

A) the direct method.
B) the indirect method.
C) either the direct or indirect method.
D) none of the above.

Question 11

The purpose of holding a cash equivalent is irrelevant for the classification in the statement of cash flows.

Question 12

A company calculates its cash flows from operating activities as profit +/- accruals.This is:

A) the direct method.
B) the indirect method.
C) neither the direct or the indirect method.
D) none of the above.

Question 13

A company holds $100 000 in a term deposit account as an interest-generating investment.For purposes of the statement of cash flows,the term deposit will be classified as:

A) a cash equivalent.
B) an investment.
C) either a cash equivalent or an investment.
D) none of the above.

Question 14

Insurance proceeds from the destruction of a factory by fire would be classified as:

A) operating cash flow.
B) financing cash flow.
C) investing cash flow.
D) none of the above.

Question 15

A company records a net profit of $220 for the year.Other information for the year: Depreciation expense $40
Increase in accounts receivable $60
Decrease in accounts payable $30
Cash flow from operating activities is:

A) $260.
B) $330.
C) $270.
D) $170.

Question 16

Cash payments to buy back shares will be classified as:

A) cash flow from operating activities.
B) cash flow from investing activities.
C) cash flow from financing activities.
D) none of the above.

Question 17

Discuss why Australia moved from a requirement to prepare a statement of sources and application of funds to a statement of cash flows.

Question 18

A statement of cash flows can be prepared using:

A) the reconstruction of ledgers approach.
B) the formula approach.
C) the spreadsheet approach.
D) all of the above.

Question 19

The time to maturity is relevant in the classification of cash equivalents.

Question 20

The classification of an item as a cash equivalent means that changes in the balance:

A) will be disclosed in the statement of cash flows.
B) will not be disclosed in the statement of cash flows.
C) may be disclosed at discretion of the entity.
D) none of the above.

Question 21

A reconciliation of profit or loss and cash flows is required using either the direct or indirect method of disclosing cash flows from operations.

Question 22

Cash flows resulting from foreign currency transactions are translated at the exchange rates applicable at the balance sheet date.

Question 23

In preparing a consolidated statement of cash flows,what items can be shown on a net cash flow basis?

Question 24

Assets owned by a subsidiary acquired during the year are treated as negative financing cash flows in a consolidated statement of cash flows.

Question 25

Discuss the treatment of subsidiaries acquired and disposed of in the consolidated statement of cash flows.

Question 26

The final step in the reconstruction of ledger accounts involves the entries in the ledger that relate to non-cash transactions for the period.

Question 27

A company has total sales revenue of $600 000 for a period.The balance of accounts receivable was $200 000 at the start of the year and $220 000 at the end of the year.Cash sales amounted to $50 000.Receipts from customers is:

A) $600 000.
B) $530 000.
C) $550 000.
D) $580 000.