Question 1

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

Accepted Answer

Cash and cash equivalents are important terms in the context of a statement of cash flows.

Cash refers to physical currency, such as coins and banknotes, as well as any deposits in bank accounts that are available for immediate use. This includes funds in checking accounts, petty cash, and any other highly liquid assets that can be readily converted into cash.

Cash equivalents, on the other hand, are short-term, highly liquid investments that are easily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Examples of cash equivalents include Treasury bills, money market funds, and short-term government bonds with maturities of three months or less.

In a statement of cash flows, both cash and cash equivalents are included in the calculation of a company's net cash flow from operating, investing, and financing activities. This provides a clear picture of the company's ability to generate cash and its liquidity position. It also helps investors and creditors assess the company's ability to meet its short-term obligations and fund its operations.

Overall, understanding the distinction between cash and cash equivalents is crucial for accurately analyzing a company's financial health and its ability to generate and manage cash.

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

The following are cash flow transactions for Greenfell Ltd:
$$\begin{array} { | l | l | } 
\hline \text { I } & \text { Depreciation and amortisation } \
\hline \text { II } & \text { Impairment loss } \
\hline \text { III } & \text { Issue of bonus shares } \
\hline IV & \text { Conversion of debt to equity } \
\hline V & \text { Purchase of property plant and equipment } \
\hline VI & \text { Dividend reinvestment } \
\hline
\end{array}$$
Which of the following combinations includes all the non-cash investing and financing transactions of Greenfell Ltd that are required to be disclosed in the notes to the accounts as per AASB 107 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 D

Question 4

Saints Ltd 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:
$$\begin{array} { | l | r | } 
\hline \text { Gain on sale of equipment } & 12000 \
\hline \text { Proceeds from sale of equipment } & 20000 \
\hline \text { Purchase of government bonds (dated 30 June 2014, face value of \$400 000) } & 360000 \
\hline \text { Dividends declared } & 90000 \
\hline \text { Dividends paid } & 76000 \
\hline \text { Proceeds from issue of share capital } & 150000 \
\hline
\end{array}$$
What is the amount of net cash used in investing and financing activities respectively?

Accepted Answer

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

Question 5

Jaunty Ltd provides the following information for the period ended 30 June 2015:
 
All transactions are in cash unless otherwise indicated.What is the net cash flow from investing activities?

Accepted Answer

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

Question 6

The following information is provided for Unique Ltd for the period ended 30 June 2015:
\[\begin{array} { | l | r | } 
\hline & \$ 0 \
\hline \text { Cost of goods sold for the year } & 930 \
\hline \text { Discounts received for early payment to suppliers } & 60 \
\hline \text { Opening balance of trade creditors } & 160 \
\hline \text { Closing balance of trade creditors } & 250 \
\hline \text { Opening balance of inventory } & 85 \
\hline \text { Closing balance of inventory } & 110 \
\hline \text { Sales for the year } & 1560 \
\hline \text { Discounts provided to customers for early payment } & 79 \
\hline \text { Doubtful debts expense } & 38 \
\hline \text { Opening balance of accounts receivable } & 100 \
\hline \text { Closing balance of accounts receivable } & 130 \
\hline \text { Bad debts expense } & 47 \
\hline \text { Opening balance of the provision for doubtful debts } & 115 \
\hline \text { Closing balance of the provision for doubtful debts } & 90 \
\hline \text { Opening balance dividends payable } & 120 \
\hline \text { Closing balance dividends payable } & 90 \
\hline \text { Dividends proposed } & 80 \
\hline
\end{array}\]
All transactions are in cash unless otherwise indicated.What is the net cash flow from operating activities for the period?

Accepted Answer

A)  Net cash inflow $596 000 
B)  Net cash inflow $426 000 
C)  Net cash inflow $536 000 
D)  Net cash inflow $486 000 
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 7

AASB 107 requires ledger accounts to be reconstructed in order to calculate cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 8

Swans Machinery Ltd 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 Ltd 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 Ltd 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?

Accepted Answer

A)  $3 470 000; ($20 000) 
B)  $3 520 000; ($20 000) 
C)  $3 470 000; (200 000) 
D)  $3 520 000; ($500 000) 
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 9

AASB 107 requires disclosures about non-cash financing and investing activities.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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

Question 11

Mistril Ltd provides the following information for the period ended 30 June 2015:
$\begin{array}{|l|r|} 
\hline
& \$ 0 \
\hline \text { Interest revenue } & 50 \
\hline \text { Opening balance interest receivable } & 25 \
\hline \text { Closing balance interest receivable } & 15 \
\hline\text { Debentures (asset) discount amortisation }& 6 \
\hline\text { Income tax expense } & 15 \
\hline \text { Opening balance income tax payable } & 29 \
\hline \text { Closing balance income tax payable } & 33 \
\hline \text { Opening balance deferred tax liability } & 9\
\hline \text { Closing balance deferred tax liability } & 4 \
\hline \text { Dividend revenue } & 10 \
\hline \text { Opening balance of dividend receivable } & 6 \
\hline \text { Closing balance of dividend receivable } &9\
\hline
\end{array}$
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 12

In accordance with AASB 107,what is the appropriate classification for the conversion of preference shares to ordinary shares?

Accepted Answer

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

Question 13

Bulldogs Ltd 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?

Accepted Answer

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

Question 14

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 15

The statement of cash flows may assist in determining the ability of an entity to:

Accepted Answer

A)  generate cash flows. 
B)  obtain internal finance. 
C)  meet its financial commitments to customers. 
D)  generate cash flows and meet its financial commitments to customers. 
A)  generate cash flows. 
B)  obtain internal finance. 
C)  meet its financial commitments to customers. 
D)  generate cash flows and meet its financial commitments to customers.

Question 16

Discuss the potential limitations of the statement of cash flows.

Accepted Answer

The statement of cash flows is a valuabl

Question 17

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

Accepted Answer

AASB 107 requires that cash flows be cla

Question 18

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

Accepted Answer

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

Question 19

Following are the cash flow transactions for Wadonga Ltd:
$\begin{array}{|l|l|}
\hline \text { I } & \text { Non-cash items } \
\hline \text { II } & \text { Cash proceeds from suppliers } \
\hline \text { III } & \text { Payment of debentures } \
\hline \mathrm{IV} & \text { Proceeds from issue of a convertible note }\
\hline \mathrm{V} &  \text { Purchase of property plant and equipment }\
\hline \mathrm{VI} &  \text { Proceeds from issue of ordinary shares }\
\hline
\end{array}$
Which of the following combinations includes all of the transactions that will determine cash flows from financing activities of Wadonga Ltd that are in accordance with AASB 107 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 20

Following are cash flow transactions for Cootamundra Ltd:
$\begin{array}{|l|l|}
\hline \text { I} & \text { Interest paid } \
\hline \text { II} & \text { Interest received } \
\hline \text { III } & \text { Dividends paid } \
\hline \mathrm{IV} & \text { Dividends received } \
\hline \mathrm{V} & \text { Purchase of property plant and equipment } \
\hline \mathrm{VI}&\text { Proceeds from issue of shares }\
\hline
\end{array}$
Which of the following combinations includes all transactions that may by classified under investing activities of Cootamundra Ltd that are in accordance with AASB 107 Statement of Cash Flows?

Accepted Answer

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

Exam 19: The Statement of Cash Flows

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

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

Jaunty Ltd provides the following information for the period ended 30 June 2015: All transactions are in cash unless otherwise indicated.What is the net cash flow from investing activities?

AASB 107 requires ledger accounts to be reconstructed in order to calculate cash flows from operating activities.

AASB 107 requires disclosures about non-cash financing and investing activities.

In accordance with AASB 107,what is the appropriate classification for the conversion of preference shares to ordinary shares?

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?

The statement of cash flows may assist in determining the ability of an entity to:

Discuss the potential limitations of the statement of cash flows.

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

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

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of 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

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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