Deck 6: Disclosure: Statement of Cash Flows

Question 1

According to AASB 107/IAS 7 Statement of Cash Flows, which of the following items does not fall within the definition of cash?

A) Accounts receivable.
B) Bank notes and coins.
C) Deposits on the short-term money market with a term of less than 3 months.
D) Non-bank bills that are readily convertible to cash.

Answer 1

A

Question 2

Items classified as financing activities on an entity's Statement of Cash Flows are usually associated with:

A) disposal of non-current assets.
B) purchase of shares by the entity.
C) sales of goods and services by the entity.
D) movements in non-current liabilities and equity.

Answer 2

D

Question 3

When presenting the reconciliation from profit to net cash from operating activities:

A) add increases in inventories.
B) deduct increases in accounts payable.
C) deduct loss on sale of equipment.
D) add non-cash expenses such as depreciation.

Answer 3

D

Question 4

During the financial year River Gums Limited had sales of $46,000. The opening balance of accounts receivable was $11,000 and the closing balance was $14,600. Bad debts amounting to $800 were written off during the period. The cash receipts from customers during the year amounted to:

A) $41,600.
B) $49,600.
C) $43,200.
D) $42,400.

Question 5

Operating activities in a Statement of Cash Flows are generally associated with:

A) changes in equity of an entity.
B) revenues and expenses of an entity.
C) acquisitions of non-current assets of an entity.
D) movements in non-current liabilities of an entity.

Question 6

Howard Limited had profit of $33,000 during the financial year. Included in profit was a depreciation expense of $14,000. Across the year accounts receivable increased by $11,000 and accounts payable increased by $5,000. The amount of cash flow from operating activities is:

A) $12,000.
B) $30,000.
C) $42,000.
D) $60,000.

Question 7

During the financial year, Henry Limited has a cost of sales amounting to $305,000. Opening balances were: inventory $42,000; accounts payable $32,000. Closing balances were: inventory $47,000; accounts payable $24,000. A discount of $2,000 for prompt payment was received. The amount of cash paid for goods purchased during the year was:

A) $320,000.
B) $300,000.
C) $316,000.
D) $306,000.

Question 8

Which of the following items is classified as a 'financing activity' in the Statement of Cash Flows?

A) Cash payment on redemption of the company's debentures.
B) Cash payment to purchase debentures of another entity.
C) Cash received from accounts receivable.
D) Impairment losses.

Question 9

Scott Limited had a net profit after tax of $650,000 for the financial year. Included in this profit was: Depreciation expense $80 000
Gain on sale of investments $30 000
Decrease in inventories $15 000
Increase in Accounts receivable $35 000
The cash flow from operating activities during the year was:

A) $580,000.
B) $620,000.
C) $680,000.
D) $720,000.

Question 10

The statement of cash flows is not used to:

A) assess the ability of an entity to generate cash.
B) help predict future cash flows.
C) check the accuracy of past assessments of future cash flows.
D) indicate significant changes in asset, liability and equity accounts for the year.

Question 11

Sunshine Limited had a profit after tax of $55,000 for the financial year. Included in this profit was a depreciation expense of $7,000 and a gain on sale of investments of $1,500. Accounts receivable increased by $2,800; inventories increased by $900 and accounts payable increased by $6,300. The cash flow from operating activities amounted to:

A) $63,100.
B) $57,900.
C) $55,300.
D) $46,900.

Question 12

The following information is required to be disclosed in a note to the statement of cash flows, except:

A) details of the aggregate cash flows arising from the acquisition or disposal of businesses.
B) details of the cash flows arising from the acquisition or disposal of non-current assets.
C) details of non-cash transactions in relation to investing and financing activities if not disclosed elsewhere.
D) an explanation of the composition of cash and cash equivalents including identification of any balances that are not available for use.

Question 13

Which of the following items is classified as part of 'operating activities' in the Statement of Cash Flows?

A) Bad debts expense.
B) Depreciation of non-current assets.
C) Proceeds from the sale of non-current assets.
D) Receipts from customers from the sale of goods.

Question 14

XYZ Limited has the following ledger account balances: Income tax payable opening balance $47,000; closing balance $29,000. The amount of tax expense accrued at the end of the year was $22,000. The amount that has been paid during the year to the taxation authorities for incomes taxes is:

A) $54,000.
B) $22,000.
C) $40,000.
D) $98,000.

Question 15

A comprehensive method that reverses or adjusts the non-cash movements of each statement of financial position account in a spreadsheet is known as the:

A) cash records approach.
B) cash book approach.
C) reconstruction of accounts approach.
D) statement of financial position approach.

Question 16

The following information relating to Equipment was extracted from the records of Bright Skies Limited: Opening balance $360 000
Proceeds from sale of equipment $6000
Closing balance $400 000
Cost of equipment sold $40 000
Cost of new equipment $80 000
Carrying amount of equipment sold $ 10 000
The total cash flows from these investing activities is determined as:

A) $40,000 cash outflow.
B) $74,000 cash outflow.
C) $76,000 cash outflow.
D) $80,000 cash outflow.

Question 17

All of the following items must be separately disclosed in the Statement of Cash Flows, except:

A) dividends paid.
B) dividends received.
C) income taxes paid.
D) auditor's remuneration paid.

Question 18

Which of the following items is classified as part of 'investing activities' in the Statement of Cash Flows?

A) Depreciation of non-current assets.
B) Income taxes paid.
C) Acquisition of non-current assets.
D) Proceeds from an issue of shares.

Question 19

Which of the following items would be presented in a Statement of Cash Flows?

A) Refinancing of long-term debt.
B) Proceeds from the issue of debentures.
C) Payment of dividends through a share investment scheme.
D) Acquisition of an investment in a subsidiary for consideration consisting of an exchange of non-current assets and liabilities.

Question 20

All of the following are limitations of the statement of cash flows, except:

A) financial ratios based on cash flow data are better at predicting financial distress for companies than other ratios that rely solely on accrual accounting balances.
B) it provides past cash flow data, which may not be a good predictor of future cash flows.
C) the direct method of determining cash flows from operating activities is more costly to apply than the indirect method.
D) non-cash transactions and events while relevant to the financial affairs of the entity are excluded from the statement of cash flows.