A draft statement of cash flows contains the following calculation of net cash inflow from operating activities: USDm Operating profit 13 Depreciation 2 Decrease in inventories (3) Decrease in trade and other receivables 5 Decrease in trade payables 4 ——— Net cash inflow from operating activities 21 Which of the following corrections need to be made to the calculation?(1) Depreciation should be deducted, not added.(2) Decrease in inventories should be added, not deducted.(3) Decrease in receivables should be deducted, not added.(4) Decrease in payables should be deducted, not added.
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1 .On 20 May 2016 the finance director of Orajee reported to the board of directors that the company’s financial statements for the year to 31 March 2016 reported a profit of USD3,528,650.On 26 May 2016 the directors were informed of the following:(1) A flood on 25 May 2016 in one of the company’s warehouses damaged inventory valued at USD330,000. All inventory was uninsured against flood damage. It will cost USD20,000 to dispose of the damaged items and clear up the affected part of the warehouse.(2) An insurance claim in respect of inventory which was stolen on 2 April 2016 was settled for USD250,000. The finance director had anticipated that the claim would be settled for USD270,000.What is Orajee’s reported profit for the year to 31 March 2016 when these events have been accounted for?
A USD3,198,650 B USD3,178,650 C USD3,428,650 D USD3,528,650
2 .On 1 December 2015, after Flower’s draft financial statements for the year to 30 September 2015 had been prepared, the accountant received a letter regarding an accident which had taken place on 14 September 2015.The accident had destroyed a machine with a carrying amount of USD275,000. The first USD30,000 of any claim is not covered under the company’s insurance policy. The accountant had treated this correctly when drafting the financial statements.The letter now informs Flower that as the accident was due to negligence, the entire loss is uninsured.How does the information in the letter affect the draft financial statements?
A USD245,000 loss should be disclosed in a note B USD275,000 loss should be disclosed in a note C USD245,000 should be expensed to profit or loss D USD275,000 should be expensed to profit or loss
3 .On 6 March 2015, there was a fire in Tingle’s factory. Tingle incurred USD125,000 in repairing the damage. As Tingle had insurance cover, USD125,000 was reported as a receivable in the draft financial statements for the year to 30 April 2015. In May 2015, the insurance company advised that due to non-compliance with the terms of the insurance contract, only USD12,500 of the repair costs would be reimbursed.Which of the following is the correct accounting treatment for the repair costs in the financial statements for the year to 30 April 2015?
A Only a disclosure note is required B Only an expense of USD112,500 should be recognised C Only a receivable for USD12,500 should be recognised D Both an expense of USD112,500 and a receivable for USD12,500 should be recognized
4 .An extract from a statement of cash flows prepared by a trainee accountant is shown below: USDm Profit before taxation 28 Adjustments for: Depreciation (9) ——— Operating profit before working capital changes 19 Decrease in inventories 3 Increase in receivables (4) Increase in payables (8) ——— Cash generated from operations 10 ——— Which of the following criticisms of this extract are correct?(1) Depreciation charges should have been added, not deducted(2) Decrease in inventories should have been deducted, not added.(3) Increase in receivables should have been added, not deducted.(4) Increase in payables should have been added, not deducted
A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4
5 .Which of the following items could appear in a company’s statement of cash flows?(1) Proposed dividends(2) Rights issue of shares(3) Bonus issue of shares(4) Repayment of loan
A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4
7 .A company sold a building at a profit.How should this transaction be treated in the company’s statement of cash flows?
A Proceeds of sale: Cash inflow under Financing activities;Profit on sale: Added to profit in calculating cash flow from operating activities B Proceeds of sale: Cash inflow under Investing activities;Profit on sale: Deducted from profit in calculating cash flow from operating activities C Proceeds ...
8 .The following information was extracted from the statements of financial position of Abacus at 31 December 2015 and 31 December 2014: 2015 2014 USD000 USD000 Inventory 120 100 Receivables 175 140 Trade payables 215 175 What is the overall effect of the above on Abacus’s cash flows in the year ended 31 December 2015?
A USD25,000 outflow B USD15,000 outflow C USD15,000 inflow D USD25,000 inflow
9 .Greenfinch has an operating profit which exceeds the net cash inflow from operating activities.Which of the following changes over the year could have caused this difference?
A Trade payables increased B Inventory decreased C Prepayments decreased D Trade receivables increased
10 .The statements of financial position of Jurric at 30 April 2015 and 2014 include the following: 2015 2014 USD USD Inventory 193,885 164,843 Payables 62,887 87,996 How should the changes in these amounts be reflected in the statement of cash flows for the year to 30 April 2015?
A Change in inventory Inflow; Change in payables Inflow B Change in inventory Outflow; Change in payables Outflow C Change in inventory Inflow; Change in payables Outflow D Change in inventory Outflow; Change in payables Inflow
