Exam 4: The Statement of Cash Flows

When using the indirect method in preparing the statement of cash flows, decreases in inventory, trade receivables and prepayments are deducted from operating profit while increases in trade payables, accruals and provisions are added to operating profit.

Luigi Limited has an operating profit for the year ended 30 June 2019 of £84,000. During the year, £65,000 depreciation was charged on the company's non-current assets. Inventory at 30 June 2018 was £20,000, while inventory at 30 June 2019 was £25,000. Trade receivables at 30 June 2019 were £35,000 compared to trade receivables at 30 June 2018 of £38,000. Trade payables at 30 June 2019 totalled £29,000 compared to trade payables at 30 June 2018 of £31,000. What is Luigi Limited's cash inflow from operating activities for the year ended 30 June 2019 using the indirect method?

When using the indirect method in preparing the statement of cash flows, increases in inventory, trade receivables and prepayments are deducted from operating profit while decreases in trade payables, accruals and provisions are added to operating profit.

The statement of cash flows can be drawn up using either the direct method or the indirect method. Under the indirect method, the total inflows and outflows from operations are ignored and the operating profit for a period is adjusted for increases or decreases in inventory, receivables, prepayments, payables and accruals and for the effect of non-cash items. Which one of the following statements is true?

The J Organization has cash inflows from operating activities of £14.5m, cash inflows from financing activities of £2.6m and a net decrease in cash and cash equivalents of £4.2m. What is the cash outflow from investing activities?

Boris Limited has the following figures in the financial statements for the year ended 31 December 2019: 2019 2018 £ £ Operating profit 110,000 130,000 Profit on disposal of property 20,000 5,000 Depreciation charged in year 65,000 62,000 Inventories 75,000 70,000 Trade receivables 92,000 85,000 Trade payables 88,000 100,000 What is Boris Limited's cash inflow from operating activities for the year ended 31 December 2019 using the indirect method?

During the year ended 30 September 2019 Ricky Limited sold motor vehicles which had cost £20,000 three years ago, for £10,000. The total depreciation charged on these motor vehicles since they were purchased was £12,000 and the sale resulted in a profit on disposal of £2,000. Interest received during the year was £2,000 and interest paid was £5,000. Additions to property, plant and equipment during the year totalled £50,000 and payment for these new assets was in cash. This cash was paid out of the money raised from a share issue during the year which produced a cash inflow of £100,000. What is Ricky Limited's cash flow from investing activities for the year ended 30 September 2019?

Roberta Limited has an operating profit for the year ended 28 February 2020 of £25,000. During the year, £40,000 depreciation was charged on the company's non-current assets. Inventory at 28 February 2019 was £10,000, while inventory at 28 February 2020 was £15,000. Roberta Limited trades for cash and had no trade receivables at either 28 February 2019 or 28 February 2020. Trade payables at 28 February 2019 stood at £20,000 while trade payables at 28 February 2020 amounted to £35,000. During the year, Roberta Limited sold non-current assets realising a profit on disposal of £3,000. What is Roberta Limited's cash inflow from operating activities for the year ended 28 February 2020 using the indirect method?

Two figures change each time a new transaction is undertaken. Which accounting convention does this statement describe?

The recognition of all income and expenditure in the accounting period in which they occurred, rather than in the accounting period in which cash is received or paid, describes which accounting convention?

Which of the following statements are true? Please select all that apply.

When using the indirect method in preparing the statement of cash flows, decreases in inventory, trade receivables and prepayments are added to operating profit while decreases in trade payables, accruals and provisions are deducted from operating profit.

Exe Limited acquired plant and machinery for use in its business at a cost of £50,000 two years ago. The plant and machinery was estimated to have a residual value of £10,000 and an estimated useful life of 5 years. The plant and machinery has been depreciated on the straight line basis. At the end of 2 years the plant and machinery was sold and a loss of £4,000 was made on the sale. What is the cash inflow from the sale of the plant and machinery that will be recorded under cash flows from investing activities?

Cash flows from investing activities consist of cash paid out to acquire new non-current assets, cash paid to acquire non-current asset investments, cash received from the sale of non-current assets, cash received from the sale of non-current asset investments, interest received and dividends received.

Which one of the following would be classified as a cash flow from financing activities in the statement of cash flows of a mining company?

The presentation or measurement of the same piece of accounting information on the same basis each year is a description of which accounting convention?

The assumption that a business will continue in operational existence for the foreseeable future is a description of which accounting convention?

Investing Limited has a net increase in cash and cash equivalents of £22m, cash inflows from financing activities of £7m and cash inflows from operating activities of £39m. What is the cash outflow from investing activities?

Which one of the following statements is not true?

'Interest paid' appears under cash flows from investing activities.