Deck 24: Liabilities

Question 1

Determine the amount of cash received from customers during 2014. $$\begin{array} { l r } \text { Accounts Receiv able (31-Dec-2013) } & \$ 21,000 \\\text { Accounts Receiv able (31-Dec-2014) } & 18,000 \\\text { Sales } & 90,000\end{array}$$

A)$57 000
B)$63 000
C)$87 000
D)$93 000

Answer 1

$93 000

Question 2

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

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'

Answer 2

B

Question 3

Under IAS 7/AASB 107 which of these needs to be disclosed in the notes attached to the statement of cash flows?

A)Standby credit arrangements
B)The closing bank balance
C)The opening bank balance
D)Proceeds from a share issue

Answer 3

A

Question 4

The statement of profit or loss of Zang Co shows accrual-basis interest income for the year ended 30 June 2014 as $400.The comparative balance sheets show that interest receivable at 30 June 2013 and 30 June 2014 was $45 and $80 respectively.Determine the amount of cash received by way of interest during the year.

A)$45
B)$365
C)$400
D)$435

Question 5

The primary purpose of a statement of cash flows is to provide information about:

A)Profit
B)Long-term financial position
C)Gross profit
D)Cash inflows and cash outflows

Question 6

These are extracts from the balance sheets of Mitchell Ltd: $\begin{array}{lrr} &30 \text { June }\\& 2013 & 2014 \\\text { Plant } & \$ 10000 & \$ 15000 \\\text { Accurmulated depreciation - plant } & 4000 & 5000\end{array}$
$\begin{array}{l}\text { The income statement for the year ended } 30 \text { June } 2014 \text { shows: }\\\begin{array}{ll}\text { Depreciation expense - plant } & 1500 \\\text { Proceeds from the sale of plant } & 1600 \\\text { Carrying value of plant sold } & 2500\end{array}\end{array}$ During the year Mitchell Ltd sold plant that had cost $3,000.The accumulated depreciation on the plant sold by Mitchell Ltd during year is:

A)$4000
B)$1500
C)$2500
D)$500

Question 7

Hocking Duck reports for 2014: $$\begin{array} { l r } \text { B eginning inventory } & \$ 30000 \\\text { Ending inventory } & 40000 \\\text { Cost of sales } & 90000\end{array}$$ Determine credit purchases for the year.

A)$100 000
B)$90 000
C)$110 000
D)$140 000

Question 8

Under IAS 7/AASB 107 how many of these items is required to be disclosed in a note attached to the statement of cash flows?
.A reconciliation of cash and cash equivalents with the items reported in the balance sheet
.A reconciliation of net cash from operating activities with profit after income tax
.Details of cash flows from the acquisition and disposal of subsidiaries

A)0
B)1
C)2
D)3

Question 9

The statement concerning the concept of cash adopted by IAS 7/AASB 107 that is incorrect is:

A)Transfers between items included in the definition of cash and cash equivalents are not reported in the statement of cash flows
B)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
C)Accounts receivable are generally included in the definition of cash and cash equivalents
D)Depending on the conditions that apply,a bank overdraft may be treated as a financing activity

Question 10

The Doore Knob Company's accounting records are set out below: $\begin{array}{lcc}&\text { Beginning Balance }&\text {Ending Balance }\\&1000 & 1000 \\&\$ & \$\\\text { Accounts receivable } & 15 & 22 \\\text { Accounts payable } & 10 & 8 \\\text { Prepaid expenses } & 12 & 16 \\\text { Inventory } & 20 & 23 \\\text { Sales } & - & 80\\\text { Cost of sales }&-&30\\\text { Expenses (other than cost of sales) }&-&21\end{array}$ Determine the amount of cash paid for purchases of inventory during the period.

A)$25 000
B)$29 000
C)$35 000
D)$33 000

Question 11

If credit purchases are $100 000 determine the cash paid for the purchase of inventory for 2014. $$\begin{array} { l r } \text { Beginning accounts payable } & \$ 30000 \\\text { Ending accounts payable } & 42000\end{array}$$

A)$88 000
B)$112 000
C)$128 000
D)$152 000

Question 12

The statement concerning the treatment of the purchase and sale of non-current assets in a statement of cash flows that is incorrect is:

A)The carrying value of a non-current asset that has been sold is treated as an investing outflow
B)The proceeds of sale from a non-current asset are treated as an investing inflow
C)The cash purchase of a non-current asset is treated as an investing outflow
D)Inflows and outflows for the purchase and sale of non-current assets must not be netted off against each other

Question 13

During the year a firm reported that accounts receivable had increased by $35 000.If accrual basis sales were $200 000 the amount of cash received from customers during the year must have been:

A)$165 000
B)$190 000
C)$210 000
D)$235 000

Question 14

Tracy Co had a cost of sales during the year just ended of $180 000.During the year accounts payable and inventory each increased by $16 000.What amount of cash was paid for purchases during the year?

A)$152 000
B)$180 000
C)$176 000
D)$160 000

Question 15

When an annual statement of cash flows is prepared the sum of the three major components,operating activities,investing activities and financing activities,add up to:

A)The ending cash at bank account balance
B)Profit for the period
C)The ending working capital
D)The change in the cash at bank account balance over the year

Question 16

How many of these would be classified as investing activities on a statement of cash flows?
O purchase of a computer
O issue of debentures
O purchase of inventory
O payment of dividends

A)One
B)Two
C)Three
D)Four

Question 17

The records of Count Bases Pizza's showed the following:
$\begin{array}{lcr}&30 \text { June } 13&30 \text { June } 14\\\text { Pizza ovens and equipment } & \$ 49000 & \$ 53000 \\\text { Accumulated depreciation ovens and equipment } & 10000 & 12000\\\text { Cost of equipment sold } && 5000 \\\text { Carrying value of equipment sold } && 3000 \\\text { Proceeds of sale of equipment } && 4500\end{array}$
What is the investing cash inflow for equipment sold during 2013/14?

A)Carrying value of equipment sold $3 000
B)Equipment sold $4 000
C)Proceeds of sale of equipment $4 500
D)Cost of equipment sold $5 000

Question 18

Which of the following is not classified as a financing activity by IAS 7/AASB 107?

A)Dividends paid to shareholders
B)The sale of shares that have been held as an investment
C)The issue of shares by a company to raise capital
D)Repayment of borrowings

Question 19

The ledger account for buildings had a balance of $520 000 at the beginning of the year and a balance of $750 000 at the end of the year.If the buildings have been revalued upwards by $100 000 during the year what is the investing outflow for the period,for buildings,assuming no buildings were sold?

A)$130 000
B)$230 000
C)$750 000
D)$100 000

Question 20

The balance sheets of I.Turner,sole trader,showed: $\begin{array}{lrr} &30 \text { June }\\& 2013 & 2014 \\\text { Capital I. Turner } & \$ 150000 & \$ 190000\end{array}$ The profit for the year ended 30 June 2014 was $60 000.During the year additional capital of $40 000 was contributed in cash.Drawings in cash were made weekly.The amount of drawings for the year is:

A)$40 000
B)$60 000
C)$20 000
D)$100 000

Question 21

OPS Ltd provided the following information for the year ended 30 June 2014.
Revenue $240 000
Accounts receivable 1 July 2013 30 000
Accounts receivable 30 June 2014 20 000
Bad debts written off during the year* 6 000
* Direct method debit bad debts expense $6 000; credit accounts receivable $6 000).
Cash receipts from customers for the year ending 30 June 2014 were?

A)$256 000
B)$236 000
C)$224 000
D)$244 000

Question 22

O______________ activities in a statement of cash flows are those activities which relate to the main revenue-producing activities of the entity.

Question 23

A statement of cash flows prepared under IAS 7/AASB 107 classifies cash receipts and cash payments into o___________________,i_________________ and financing cash flows.

Question 24

How many of these are non-cash transactions?
.Expense for impairment of goodwill
.A share dividend
.A discount allowed
.A bad debt write-off

A)1
B)2
C)3
D)4

Question 25

The accrual-basis tax expense in the income statement is $80 000,the beginning balance in the current tax liability account is $70 000 and the ending balance is $80 000.What is the amount of tax paid to be included in the statement of cash flows for the year?

A)$150 000
B)$80 000
C)$70 000
D)$10 000

Question 26

According to AASB's Interpretation 1031 how many of these statements relating to the treatment of GST in the statement of cash flows are true?
A)All GST outlays and GST collections are regarded as effecting operating activities
B)Cash flows from operating activities are reported at gross amounts inclusive of GST
C)Cash flows from investing activities are shown net of GST,with GST on investing activities included as part of operating activities

A)0
B)1
C)2
D)3

Question 27

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

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

Question 28

The balance sheets of Bandy Ltd show: $\begin{array}{lll} &30 \text { June }\\& 2013 & 2014 \\\text { Final Dividend Pavable } & \$ 10000 & \$ 15000\end{array}$ In addition to the information above,an interim dividend of $4000 was declared and paid on 31 January 2014.What amount in respect of dividends will appear in the statement of cash flows for the year ended 30 June 2014?

A)$4000
B)$10 000
C)$14 000
D)$19 000

Question 29

Which of these is a transaction that would be reported in the statement of cash flows itself rather than in the notes?

A)A bonus share issue
B)Amortisation of goodwill
C)Interim dividend paid
D)The acquisition of another entity by means of a share issue

Question 30

The balance sheets of Green Ltd show: $\begin{array}{lrr} &31 \text { December }\\& 2013 & 2014 \\\text { Current tax liability } & \$ 30000 & \$ 45000\end{array}$
$\text { The income statement for the year ended } 31 \text { December } 2014 \text { shows: }$
Income tax expense $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $ 45000 What amount in respect of income tax will appear in the statement of cash flows for the year ended 31 December 2014,assuming tax is paid annually in arrears and there are no over or under provisions of tax.

A)Nil
B)$30 000
C)$42 000
D)$45 000

Question 31

In its most recent financial year the Michelbook Country Club reported that Accounts payable increased $13 000; inventory decreased $9000; profit was $22,000 and depreciation expense was $5000.On the statement of cash flows,net cash flow from operating activities is: Use the indirect approach

A)$5000
B)$23 000
C)$31 000
D)$49 000

Question 32

XYZ Ltd's financial information includes the following: $\begin{array}{lc}\text { Sales }&\$100,000\\\text { Accounts Receiv able balance } 1 \text { July } 13 & 30000 \\\text { Accounts Receiv able balance 30 June } 14 & 35000 \\\text { Bad debts written off [*] } & 1000 \\\text { Discount Allowed } & 5000\end{array}$ [*] The journal entry for bad debts written off debited Bad Debts Expense $1000 and credited Accounts Receivable $1000 direct write-off method).
The cash received from customers for the year ended 30 June 14 was:

A)$89 000
B)$91 000
C)$94 000
D)$101 000

Question 33

I_________________ activities in a statement of cash flows relate to the acquisition and disposal of long-term assets.

Question 34

The untrue statement is:

A)The statement of cash flows can provide information about the causes of changes in the entity's cash position over the period
B)Analysis of an entity's cash flow position requires an examination of trends in statement of cash flows items over several years
C)The statement of cash flows can explain the effects of operating activities on the entity's cash position
D)The statement of cash flows effectively duplicates the function of the cash budget

Question 35

Which of these is not a way in which cash flows may be manipulated?

A)Use of barter
B)Use of lease financing
C)Deferring repayment of debts
D)Charging excessive depreciation

Question 36

Bender Ltd uses the allowance method of accounting for bad and doubtful debts.Their accounts show: $\begin{array}{lr}\text { Allow ance for doubtful debts 1 July } 2013 & \$ 10200 \\\text { Allow ance for doubtful debts 30 June 2014 } & 14200 \\\text { Bad \& doubtful debts expense for the year } & 8000\end{array}$ Calculate the amount of bad debts actually written off during the year.

A)$4 000
B)$11 000
C)$8 000
D)$6 200

Question 37

The concept of cash adopted by IAS 7/AASB 107 covers cash on hand and cash e________________.

Question 38

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

A)Subtracted from a profit
B)Does not appear in the reconciliation
C)Added back to a loss
D)Added back to a profit

Question 39

A statement of cash flows can be prepared by using the information in the accrual based income statement and balance sheet but with the effect of n______-c_________ transactions removed.

Question 40

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

A)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
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 notes to the statement of cash flows are important in interpreting the firm's cash position

Question 41

In the statement of cash flows GST paid is included as part of the calculation of cash flow from o_______________ activities.

Question 42

IAS 7/AASB 107 requires external,non-cash investing and financing transactions to be disclosed in n_________ attached to the statement of cash flows.

Question 43

Accrual-basis revenue plus/minus______ an increase in unearned revenue = cash-basis revenue.

Question 44

Accrual-basis expenses plus/minus________ an increase in prepaid expenses = cash payments for services.