Question 1

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

Accepted Answer

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. 
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. D

Question 2

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:

Accepted Answer

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. 
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. C

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

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

Accepted Answer

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. 
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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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?

Accepted Answer

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

Question 7

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

Accepted Answer

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)  $$\begin{array} { | l | l | l | } 
\hline \text { Decrease in inventories } & \text { Decrease in deferred tax assets } & \text { Increase in accounts receivable } \
\hline \text { subtract } & \text { add } & \text { subtract } \
\hline
\end{array}$$ 
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 8

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

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

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?

Accepted Answer

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

Question 11

Investing activities are defined by IAS 7 as those that:

Accepted Answer

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. 
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 12

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

Accepted Answer

Cash flows from operations would seem to

Question 13

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?

Accepted Answer

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

Question 14

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?

Accepted Answer

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 
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 15

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

Accepted Answer

A) True 
 B)False

Question 16

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?

Accepted Answer

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

Question 17

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?

Accepted Answer

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. 
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 18

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.

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

It is argued that at the present time th

Question 20

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?

Accepted Answer

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

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

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:

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

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

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

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

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

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.

Investing activities are defined by IAS 7 as those that:

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

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

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?

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.

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.

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters

Exam 16: The Statement of Cash Flows

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

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:

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

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

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

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

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

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.

Investing activities are defined by IAS 7 as those that:

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

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

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?

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.

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.

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters