Exam 4: The Statement of Cash Flows

During the year ended 31 December 2019 Billy Limited paid £60,000 to acquire new plant and equipment to replace assets that had originally cost £45,000 but which now had a written down value of £15,000. The replaced assets were sold for £18,000, realising a profit on sale of £3,000. During the year, interest received was £1,000 and £5,000 of interest was paid. What is Billy Limited's net cash outflow from investing activities for the year ended 31 December 2019?

Dividends paid are classified under cash flows from financing activities to reflect the return expected by shareholders who finance the business through the purchase of shares.

Olly Limited undertook the following transactions during the year ended 30 November 2019: Issued 20,000 new shares at a price of £1.50 per share. Made £6,000 of repayments on the business loan. Received dividends of £1,000 from Molly Limited. Paid loan interest of £750. Paid dividends of £10,000. Received £500 bank interest. Paid overdraft interest of £125. What is Olly Limited's net cash inflow from financing activities for the year ended 30 November 2019?

Zed Limited acquired plant and machinery for use in its business at a cost of £80,000. The plant and machinery was estimated to have a residual value of £20,000 and an estimated useful life of 4 years. The plant and machinery has been depreciated on the straight line basis. 2 years and 6 months after the date of acquisition the plant and machinery was sold and a profit of £3,500 was made on the sale of this asset. What is the cash inflow from the sale of the plant and machinery that will be recorded under cash flows from investing activities?

Which one of the following is not a cash outflow from operating activities?

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 not true?

A profit on disposal of a non-current asset is added to the operating profit when calculating the cash inflow or outflow from operating activities.

Keeping the affairs of a business and the affairs of the owner of that business totally separate describes which accounting convention?

Under the indirect method of preparing the statement of cash flows: Please select all that apply.

Angela Limited undertook the following transactions during the year ended 31 March 2020: Paid £100,000 to acquire new property, plant and equipment. Sold redundant plant and equipment. The redundant plant and equipment had cost £35,000 and had a carrying amount of £20,000 at the date of disposal. The sale made a loss on disposal of £5,000. Received interest of £3,000 from the bank. Paid interest of £6,000 on a bank loan. Received dividends from BG Plc of £2,000. Paid dividends of £25,000. What is Angela Limited's net cash outflow from investing activities for the year ended 31 March 2020?

Dividends received are classified under cash flows from financing activities while dividends paid are classified under cash flows from investing activities.

Taran Investments undertook the following transactions during the year ended 30 November 2019: Sold shares in Kish Limited for a profit of £50,000. The shares had originally cost £125,000 five years ago. Bought a new computer system for the offices at a cost of £80,000. Bought 100,000 shares in Jay Limited, a start-up, at a cost of 90 pence per share. Received dividends from various investments totalling up to £85,000. Paid bonuses to the directors of £65,000. What is Taran Investments' net cash inflow from investing activities for the year ended 30 November 2019?

During the financial year ended 31 May 2020, Brendan Limited raised £75,000 in cash from an issue of share capital and took out a new loan from the bank of £100,000. The proceeds of the share issue and the new loan were used in part to repay an existing bank loan of £150,000. A further £15,000 was raised from the sale of investments, realising a profit of £3,000 on the original cost and interest received contributed £5,000 while interest paid amounted to £10,000. Based on these figures, what is the cash inflow from financing activities for the year ended 31 May 2020?

Big Finance Corporation has cash inflows from operating activities of £20.5m, cash outflows from financing activities of £5.2m and a net increase in cash and cash equivalents of £6.7m. What is the cash outflow from investing activities?

Jonathan Limited bought plant and machinery costing £24,000 3 years ago. The plant and machinery was estimated to have a residual value of £4,000 and an estimated useful life of 4 years. The plant and machinery has been depreciated on the straight line basis. At the end of the third year, the plant and machinery was sold for £12,000. What is the profit or loss on disposal to deduct or add back to operating profit in the statement of cash flows?