Question 1

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:

Accepted Answer

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

Question 2

Which of the following statements is not in accordance with AASB 107 Statement of Cash Flows?

Accepted Answer

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. 
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 3

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?

Accepted Answer

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

Question 4

In accordance with AASB 107 Statement of Cash Flows,dividends paid may be classified as an investing or a financing cash flow.

Accepted Answer

A) True 
 B)False

Question 5

In accordance with AASB 107 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 6

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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?

Accepted Answer

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 
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 9

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

Accepted Answer

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

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

AASB 107 states that for a money market deposit to be classified as cash:

Accepted Answer

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. 
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 12

AASB 107 requires disclosure of information about transactions and events that do not result in cash flows during the financial year,including:

Accepted Answer

A)  a commitment under an operating lease. 
B)  the use of forward exchange contracts to hedge purchases. 
C)  acquisition of assets by entering into finance leases. 
D)  liquidation of investments. 
A)  a commitment under an operating lease. 
B)  the use of forward exchange contracts to hedge purchases. 
C)  acquisition of assets by entering into finance leases. 
D)  liquidation of investments.

Question 13

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 14

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

Accepted Answer

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

Question 15

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?

Accepted Answer

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 
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 16

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?

Accepted Answer

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

Question 17

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 18

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

Accepted Answer

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

Question 19

Investing activities are defined by AASB 107 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 20

Explain why AASB 107 requires disclosures to be made about non-cash financing and investing activities.

Accepted Answer

The statement of cash flows reports only

Exam 19: The Statement of Cash Flows

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:

Which of the following statements is not in accordance with AASB 107 Statement of Cash Flows?

In accordance with AASB 107 Statement of Cash Flows,dividends paid may be classified as an investing or a financing cash flow.

In accordance with AASB 107 Statement of Cash Flows,cash payments to suppliers for goods and services are classified as cash flows from operating activities.

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

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

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

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.

AASB 107 states that for a money market deposit to be classified as cash:

AASB 107 requires disclosure of information about transactions and events that do not result in cash flows during the financial year,including:

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

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

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

Investing activities are defined by AASB 107 as those that:

Explain why AASB 107 requires disclosures to be made about non-cash financing and investing activities.

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

Filters