Question 1

Which of the following are non-cash transactions?
I. Share dividend
II. Discount allowed
III. Bad debt write-off
IV. Impairment of goodwill

Accepted Answer

A)  I and IV only 
B)  II and IV only 
C)  II, III and IV only 
D)  I, II, III and IV 
A)  I and IV only 
B)  II and IV only 
C)  II, III and IV only 
D)  I, II, III and IV D

Question 2

When preparing the note attached to the cash flow statement reconciling profit and cash flow from operations, losses incurred from the sale of non-current assets are:

Accepted Answer

A)  added back to the profit. 
B)  subtracted from the profit. 
C)  do not appear in the reconciliation. 
D)  sometimes added back to the profit and sometimes subtracted from the profit depending on whether a loss or profit on disposal is incurred. 
A)  added back to the profit. 
B)  subtracted from the profit. 
C)  do not appear in the reconciliation. 
D)  sometimes added back to the profit and sometimes subtracted from the profit depending on whether a loss or profit on disposal is incurred. A

Question 3

The primary purpose of a statement of cash flows is to provide information about an entity's:

Accepted Answer

A)  gross profit. 
B)  operating activities. 
C)  long-term financial position. 
D)  cash inflows and cash outflows. 
A)  gross profit. 
B)  operating activities. 
C)  long-term financial position. 
D)  cash inflows and cash outflows. D

Question 4

Which assertion relating to the statement of cash flows is incorrect?

Accepted Answer

A)  Cash flows from one activity are not normally offset against cash flows from a different activity. 
B)  GST is not included anywhere in the statement of cash flows. 
C)  Cash outflows are shown in brackets. 
D)  The statement is headed 'for the period ended'. 
A)  Cash flows from one activity are not normally offset against cash flows from a different activity. 
B)  GST is not included anywhere in the statement of cash flows. 
C)  Cash outflows are shown in brackets. 
D)  The statement is headed 'for the period ended'.

Question 5

For a statement of cash flows, when preparing the note reconciling a net loss and cash flow from operations, depreciation is:

Accepted Answer

A)  subtracted from net loss. 
B)  added back to the net loss. 
C)  does not appear in the reconciliation. 
D)  appears as part of the profit figure. 
A)  subtracted from net loss. 
B)  added back to the net loss. 
C)  does not appear in the reconciliation. 
D)  appears as part of the profit figure.

Question 6

The following details relate to the equity of R. Simpson, sole proprietor.
$\begin{array}{lcc} 
& \text { End year 1 } & \text { End year 2 } \
\text { Capital } & \$ 60000 & \$ 60000 \
\text { Current account } & 24000 \mathrm{CR} & 38000 \mathrm{CR}^{*}
\end{array}$
$\text { * Includes nrofit for the vear of } \$ 48000$
How much was withdrawn by R. Simpson during year 2?

Accepted Answer

A)  $34 000 
B)  $62 000 
C)  $72 000 
D)  Cannot be calculated from the information provided 
A)  $34 000 
B)  $62 000 
C)  $72 000 
D)  Cannot be calculated from the information provided

Question 7

Which of the following is a classification used in the statement of cash flows?

Accepted Answer

A)  Operating activities 
B)  Selling activities 
C)  Borrowing activities 
D)  Administrative activities 
A)  Operating activities 
B)  Selling activities 
C)  Borrowing activities 
D)  Administrative activities

Question 8

The records of Angelo's Pizza showed the following:
$$\begin{array} { l r r } 
& 30 \text { June } 18 & \text { 30 June } 19 \
\text { Pizza ovens and equipment } & \$ 39000 & \$ 43000 \
\text { Accumulated depreciation ovens and equipment } & 5000 & 8000 \
\text { Cost of equipment sold } & & 6000 \
\text { Carrying value of equipment sold } & & 3000 \
\text { Proceeds of sale of equipment } & & 4500
\end{array}$$
The investing cash outflow for equipment for the year ending 30 June 2019 is:

Accepted Answer

A)  Equipment purchased $6 000 
B)  Equipment purchased $10 000 
C)  Equipment purchased $3 000 
D)  Equipment purchased $4 500 
A)  Equipment purchased $6 000 
B)  Equipment purchased $10 000 
C)  Equipment purchased $3 000 
D)  Equipment purchased $4 500

Question 9

Which of the following are non-cash transactions or events?
I. Credit sale
II. Barter transaction
III. Purchase of a building partly financed by a mortgage
IV. Takeover paid for with shares in the acquiring company

Accepted Answer

A)  I and II only 
B)  I, II and IV only 
C)  II and IV only 
D)  All of the above are non-cash transactions or events. 
A)  I and II only 
B)  I, II and IV only 
C)  II and IV only 
D)  All of the above are non-cash transactions or events.

Question 10

A statement of cash flows is being prepared using accrual based information. Using the direct write-off method to calculate cash receipts from customers, bad debts written off is:

Accepted Answer

A)  not adjusted. 
B)  shown as cash outgoing. 
C)  added to accrual-basis revenue. 
D)  subtracted from accrual-basis revenue. 
A)  not adjusted. 
B)  shown as cash outgoing. 
C)  added to accrual-basis revenue. 
D)  subtracted from accrual-basis revenue.

Question 11

Which statement concerning the concept of cash adopted by IAS 7/AASB 107 is incorrect?

Accepted Answer

A)  Accounts receivable are generally included in the definition of cash and cash equivalents. 
B)  Depending on the conditions that apply, a bank overdraft may be treated as a financing activity. 
C)  Transfers between items included in the definition of cash and cash equivalents are not reported in the statement of cash flows. 
D)  As a general rule, liquid investments with a term of three month or less, with insignificant risk of changes in value, fall within the definition of cash or cash equivalents. 
A)  Accounts receivable are generally included in the definition of cash and cash equivalents. 
B)  Depending on the conditions that apply, a bank overdraft may be treated as a financing activity. 
C)  Transfers between items included in the definition of cash and cash equivalents are not reported in the statement of cash flows. 
D)  As a general rule, liquid investments with a term of three month or less, with insignificant risk of changes in value, fall within the definition of cash or cash equivalents.

Question 12

Osco Ltd uses the allowance method of accounting for bad and doubtful debts. Bad and doubtful debts expense shown in the income statement is $10 000 and the amount of bad debts actually written off is $8 000. If sales are $220 000 and accounts receivable have increased by $12 000 over the period, the amount to be shown in the statement of cash flows for receipts from customers is:

Accepted Answer

A)  $200 000 
B)  $210 000 
C)  $220 000 
D)  $240 000 
A)  $200 000 
B)  $210 000 
C)  $220 000 
D)  $240 000

Question 13

When preparing the note reconciling profit/loss and cash flow from operations, depreciation:

Accepted Answer

A)  is subtracted from a profit. 
B)  does not appear in the reconciliation. 
C)  is added back to a loss. 
D)  is added back to a profit. 
A)  is subtracted from a profit. 
B)  does not appear in the reconciliation. 
C)  is added back to a loss. 
D)  is added back to a profit.

Question 14

If cost of sales is $300 000, inventory has increased by $12 000 and creditors have decreased by $20 000 what is the amount of cash paid for the purchase of goods for resale?

Accepted Answer

A)  $332 000 
B)  $320 000 
C)  $288 000 
D)  $268 000 
A)  $332 000 
B)  $320 000 
C)  $288 000 
D)  $268 000

Question 15

The accrual-basis tax expense in the income statement is $90 000, the beginning balance in the current tax liability account is $130 000 and the ending balance is $150 000. What is the amount of tax paid to be included in the statement of cash flows for the year?

Accepted Answer

A)  $70 000 
B)  $110 000 
C)  $130 000 
D)  $150 000 
A)  $70 000 
B)  $110 000 
C)  $130 000 
D)  $150 000

Question 16

The statement of profit or loss of Little Co shows accrual-basis interest income for the year ended 30 June 2019 as $4 000. The comparative balance sheets show that interest receivable at 30 June 2018 and 30 June 2019 was $500 and $800 respectively. The amount of cash received by way of interest during the year was:

Accepted Answer

A)  $4 500 
B)  $3 700 
C)  $3 200 
D)  $4 300 
A)  $4 500 
B)  $3 700 
C)  $3 200 
D)  $4 300

Question 17

Davis Ltd provided the following information for the year ended 30 June 2020.
$$\begin{array} { l r } 
\text { Sales } & \$ 345000 \
\text { Accounts receivable 1 July 2019 } & 60000 \
\text { Accounts receivable 30 June 2020 } & 50000 \
\text { Bad debts written off during the year* } & 26000
\end{array}$$
Direct method (DR Bad debts expense $26 000; CR Accounts receivable $26 000).
Cash receipts from customers for the year ending 30 June 2020 were:

Accepted Answer

A)  $309 000. 
B)  $329 000. 
C)  $361 000. 
D)  $381 000. 
A)  $309 000. 
B)  $329 000. 
C)  $361 000. 
D)  $381 000.

Question 18

Discount allowed is a:

Accepted Answer

A)  cash item that is included as an outflow in the statement of cash flows. 
B)  cash item that is included as an inflow in the statement of cash flows. 
C)  cash item that is adjusted in a note attached to the statement of cash flows. 
D)  non-cash item that is deducted from accrual based revenue and thus not included in the statement of cash flows. 
A)  cash item that is included as an outflow in the statement of cash flows. 
B)  cash item that is included as an inflow in the statement of cash flows. 
C)  cash item that is adjusted in a note attached to the statement of cash flows. 
D)  non-cash item that is deducted from accrual based revenue and thus not included in the statement of cash flows.

Question 19

Which statement concerning the interpretation of a statement of cash flows is incorrect?

Accepted Answer

A)  The notes to the statement of cash flows are important in interpreting the firm's cash position. 
B)  Ways in which cash flows can be manipulated include delaying cash payments and employing finance leases. 
C)  It is the indirect method rather than the direct method of preparation that is preferred by the standard setters. 
D)  The statement of cash flows as required under IAS 7/AASB 107 only goes some of the way in enabling users to establish the liquidity/solvency position of an entity. 
A)  The notes to the statement of cash flows are important in interpreting the firm's cash position. 
B)  Ways in which cash flows can be manipulated include delaying cash payments and employing finance leases. 
C)  It is the indirect method rather than the direct method of preparation that is preferred by the standard setters. 
D)  The statement of cash flows as required under IAS 7/AASB 107 only goes some of the way in enabling users to establish the liquidity/solvency position of an entity.

Question 20

Which statement concerning the indirect method of preparing a cash flow statement is correct?

Accepted Answer

A)  With the indirect method, depreciation is deducted from profit to arrive at net cash from operating activities. 
B)  The direct, rather than the indirect method of preparation, is the method preferred by standard setters. 
C)  The indirect method is more expensive to implement that the direct method. 
D)  The investing and financing sections of a cash flow statement differ depending on whether the direct or indirect method of preparation is used. 
A)  With the indirect method, depreciation is deducted from profit to arrive at net cash from operating activities. 
B)  The direct, rather than the indirect method of preparation, is the method preferred by standard setters. 
C)  The indirect method is more expensive to implement that the direct method. 
D)  The investing and financing sections of a cash flow statement differ depending on whether the direct or indirect method of preparation is used.

Exam 18: Statement of Cash Flows

Which of the following are non-cash transactions? I. Share dividend II. Discount allowed III. Bad debt write-off IV. Impairment of goodwill

When preparing the note attached to the cash flow statement reconciling profit and cash flow from operations, losses incurred from the sale of non-current assets are:

The primary purpose of a statement of cash flows is to provide information about an entity's:

Which assertion relating to the statement of cash flows is incorrect?

For a statement of cash flows, when preparing the note reconciling a net loss and cash flow from operations, depreciation is:

Which of the following is a classification used in the statement of cash flows?

Which of the following are non-cash transactions or events? I. Credit sale II. Barter transaction III. Purchase of a building partly financed by a mortgage IV. Takeover paid for with shares in the acquiring company

A statement of cash flows is being prepared using accrual based information. Using the direct write-off method to calculate cash receipts from customers, bad debts written off is:

Which statement concerning the concept of cash adopted by IAS 7/AASB 107 is incorrect?

When preparing the note reconciling profit/loss and cash flow from operations, depreciation:

If cost of sales is $300 000, inventory has increased by $12 000 and creditors have decreased by $20 000 what is the amount of cash paid for the purchase of goods for resale?

The accrual-basis tax expense in the income statement is $90 000, the beginning balance in the current tax liability account is $130 000 and the ending balance is $150 000. What is the amount of tax paid to be included in the statement of cash flows for the year?

Discount allowed is a:

Which statement concerning the interpretation of a statement of cash flows is incorrect?

Which statement concerning the indirect method of preparing a cash flow statement is correct?

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation, Disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Analysis and Interpretation of Financial Statements

Accounting for Manufacturing

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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