Question 1

From the following information calculate the cash received from customers.
$$\begin{array} { l r } 
\text { Accounts receivable opening balance } & \$ 20,000 \
\text { Credit Sales } & \$ 840,000 \
\text { Accounts receivable closing balance } & \$ 40,000
\end{array}$$

Accepted Answer

To calculate cash received from customers, use the formula: Opening Accounts Receivable + Credit Sales - Closing Accounts Receivable. Thus, $20,000 + $840,000 - $40,000 = $820,000.

Question 2

A transaction that would not appear in a statement of cash flows is:

Accepted Answer

The statement of cash flows only includes transactions that involve actual cash flows. The creation of an allowance for doubtful debts (A), the upward revaluation of an asset (B), and a bonus issue of shares (C) do not involve any cash movement, hence they would not appear in a statement of cash flows.

Question 3

Generally,the dividend payment appearing in the financing section of the statement of cash flows represents:

Accepted Answer

The dividend payment appearing in the financing section of the statement of cash flows represents the proposed dividends from last year that have been paid, plus any interim dividends declared and paid in the current year. It does not include current year's dividend because it is not proposed yet.

Question 4

Which of these is a reason why a statement of cash flows could show a negative cash flow from operating activities even though the statement of comprehensive income showed a profit?

Accepted Answer

An increase in the amount of inventory held can lead to a negative cash flow from operating activities because it represents cash that has been tied up in purchasing more inventory, despite the company showing a profit on the statement of comprehensive income. This does not immediately affect income but reduces cash available from operations.

Question 5

Company F received $20,000 in cash in repayment of a loan made to L Lee.In the statement of cash flows of Company F,the $20,000 would appear as:

Accepted Answer

The repayment of a loan made by a company is considered an investing activity because it involves the investment of company funds into another entity. When the loan is repaid, the cash received is classified as an investing inflow in the statement of cash flows, reflecting the return of the invested funds to the company.

Question 6

Which of the three main financial statements was chronologically the last to be required to be included as part of the external financial reports?

Accepted Answer

The statement of cash flows was the last of the three main financial statements to be required as part of external financial reports. It was initially required in the United States in 1987 with the issuance of Financial Accounting Standards Board (FASB) Statement No. 95. The statement of comprehensive income, on the other hand, is a more recent requirement under International Financial Reporting Standards (IFRS). Prior to its adoption, companies typically presented a single statement of income or retained earnings statement. The statement of financial position (also known as the balance sheet) has long been a required financial statement for external reporting.

Question 7

Calculate net cash flow from operating activities if:
Statement of financial performance (extract)
$\begin{array}{ll}
\text { Sales (credit) } & \$ 70,000 \
\text { Less Expenses (cash) } & \$ 48,000 \
\text { Profit } & \$ 22,000
\end{array}$
$\text { Ledger acount (extrat) }$
$\begin{array}{ll}
&\text { Start of } & \text { End of } \
&\text { Period } & \text { Period }\\text { Accournts }\
\text { Receivable }&\$6,000&\$9,000
\end{array}$

Accepted Answer

Net cash flow from operating activities is calculated as Profit + Decrease in Accounts Receivable (or - Increase in Accounts Receivable) - Expenses (if not already accounted for in profit). Here, Profit = $22,000, Increase in Accounts Receivable = $9,000 - $6,000 = $3,000. Therefore, Net Cash Flow = $22,000 - $3,000 = $19,000. Expenses are not added back because they are cash expenses and already deducted to arrive at the profit.

Question 8

All purchases of inventory are for cash.If inventory at the beginning of the year is $63,000 and at the end $88,000 and the cost of sales is $200,000,the cash paid for inventory purchased for the year is:

Accepted Answer

The calculation for cash paid for inventory purchased for the year is:
Cash paid for inventory = Cost of Sales + Beginning Inventory - Ending Inventory
= $200,000 + $63,000 - $88,000
= $175,000
Therefore, the correct answer is B) $225,000.

Question 9

If $80,000 is owed by customers at the beginning of the year,$75,000 is owed at the end and credit sales are $120,000,the cash received from customers is:

Accepted Answer

We need to calculate the cash received from customers, which means we have to subtract the decrease in accounts receivable (from beginning to end) from the credit sales. 
Decrease in accounts receivable = $80,000 - $75,000 = $5,000 
Cash received from customers = Credit sales - Decrease in accounts receivable 
Cash received from customers = $120,000 - $5,000 
Cash received from customers = $115,000 
Therefore, the correct answer is C.

Question 10

Under accrual accounting,the receipt of cash from a trade debtor will:

Accepted Answer

Under accrual accounting, the receipt of cash from a trade debtor is recorded as an increase in cash but does not affect profit, because the revenue was already recognized when the sale was made, not when the cash was received.

Question 11

$54,000 is owed to suppliers for inventory purchases at the beginning of the year and $44,000 is owed at the end of the year.If annual credit purchases of inventory are $160,000,the cash paid to suppliers for the year is:

Accepted Answer

The cash paid to suppliers can be calculated using the formula: Cash Paid = Opening Balance + Purchases - Closing Balance. So, it's $54,000 + $160,000 - $44,000 = $170,000.

Question 12

Wages expense in the income statement is $56,250 with the statement of financial position at the end of the year showing accrued wages of $2,000.If there were no accrued wages at the beginning of the period,how much was paid out in cash for wages during the year?

Accepted Answer

The total amount of wages paid during the year is calculated by adding the wages expense and the accrued wages at the end of the period and subtracting the accrued wages at the beginning of the period. Since there were no accrued wages at the beginning of the period, the calculation is: Wages paid during the year = Wages expense + Accrued wages at the end of the period = $56,250 + $2,000 = $58,250. However, the question specifically asks how much was paid out in cash for wages during the year, which excludes the accrued wages at the end of the period. Therefore, the answer is $58,250 - $2,000 = $54,250. The correct choice is A.

Question 13

Indulgence Chocolates has provided the following information:
$$\begin{array} { l r } 
\text { Cost of sales for the year } & \$ 190,000 \
\text { Opening balance of accounts payable } & \$ 50,000 \
\text { Closing balance of accounts payable } & \$ 60,000 \
\text { Opening balance of inventory } & \$ 20,000 \
\text { Closing balance of inventory } & \$ 36,000
\end{array}$$
The cash payments made to suppliers during the year total:

Accepted Answer

The cash payments made to suppliers can be calculated using the formula: Cash Payments = Cost of Sales + Closing Inventory - Opening Inventory + Opening Accounts Payable - Closing Accounts Payable. Plugging in the given values: $190,000 + $36,000 - $20,000 + $50,000 - $60,000 = $196,000.

Question 14

GG Pty Ltd's accounting records show:
$\begin{array}{lcc}&\text { Beginning Balance } & \text { Ending Balance } \
&\text { '000 } & 000 \
&\$ & \$\
\text { Accounts pa yable } & 12 & 8 \
\text { Inventory } & 25 & 21 \
\text { Cost of sales } & - & 50
\end{array}$
Determine the amount of cash paid for inventory for the period.

Accepted Answer

The answer of GG Pty Ltd's accounting records show:
\(\begin{array}{lcc}&\text {...

Question 15

The cash transaction is:

Accepted Answer

Payment of a dividend to shareholders involves the actual movement of cash from the company to its shareholders, making it a cash transaction. Choices A and C involve accounting entries that do not necessarily result in an immediate cash movement.

Question 16

H Company's accounting records show:
$$\begin{array} { l r } &\$\
\text { Credit sales for the year } & 600,000 \
\text { Discounts provided for early payment } & 15,000 \
\text { Opening balance of accounts receivable } & 100,000 \
\text { Closing balance of accounts receivable } & 90,000
\end{array}$$
The cash received from customers is:

Accepted Answer

Cash received from customers = Credit sales - Discounts provided - (Opening balance of accounts receivable - Closing balance of accounts receivable)= 600,000 - 15,000 - (100,000 - 90,000)= 600,000 - 15,000 - 10,000= $595,000

Question 17

An extract from the trial balance of RRR Pty Ltd as at 30 June 2015 shows:
Income tax expense $20,000
If the income tax provided for at the end 2014 was $16,000 and taxation is paid in arrears in a lump sum,what amount will appear in the statement of cash flows for taxation paid by RRR Pty Ltd for the year ended 30 June 2015?

Accepted Answer

The amount that will appear in the statement of cash flows for taxation paid by RRR Pty Ltd for the year ended 30 June 2015 is $16,000, as taxes are paid in arrears, meaning the tax expense recorded in the previous year (2014) is paid in the current year (2015).

Question 18

An example of a non-cash investing or financing transaction is:

Accepted Answer

The purchase of a building paid for by an issue of shares direct to the vendor is a non-cash financing transaction because no cash is exchanged between the company and the vendor. Instead, shares in the company are issued to the vendor as payment. Option A is not a transaction, but rather an accounting entry. Option B is a cash transaction. Option C is a cash financing transaction where the company pays off a loan.

Question 19

If 'other expenses' in the profit and loss report is $32,000 including $8,000 of depreciation,accrued 'other expenses' at the beginning of the year is $1,000 and $0 at the end of the year,the figure for 'other expenses' that will appear in the statement of cash flows for the year is:

Accepted Answer

The cash flow statement reflects actual cash transactions. The 'other expenses' in the profit and loss report include non-cash depreciation of $8,000, so we subtract this from $32,000, resulting in $24,000. Since accrued expenses decreased by $1,000 (from $1,000 to $0), this means $1,000 was paid off, so we add this to the $24,000, resulting in $25,000.

Question 20

The tax payment appearing in the statement of cash flows of a company reflects:

Accepted Answer

The tax payment appearing in the statement of cash flows of a company reflects last year's tax liability (due to the lag in payment to tax office). This is because companies pay taxes on profits earned in the previous year, there is a lag in the payment of taxes, and therefore the tax payment appearing in the statement of cash flows refers to the taxes paid for the previous year.

Quiz 6: Measuring and Reporting Cash Flows

From the following information calculate the cash received from customers. $\begin{array} { l r } \text { Accounts receivable opening balance } & \$ 20,000 \\\text { Credit Sales } & \$ 840,000 \\\text { Accounts receivable closing balance } & \$ 40,000\end{array}$