ACCOUNTING GRADE A LEVEL (TEST)

TIME ALLOWED 1 HOUR

TOPIC: STATEMENT OF CASH FLOWS
SHORT QUESTIONS:
1. State two reasons why a statement of cash flows is important to share holders.

2.

State two reasons how statement of cash flow differs from cash budgets.

3.

Briefly explain why are cash flow statements sometimes considered more useful than profit
statements?

4.

Briefly state two ways in which a company could manipulate the year end cash position.

5.

In accordance with IAS 7 Statement of cash flows; define cash and cash equivalents

[Total marks 10]

2

STATEMENT OF CASH FLOWS (MULTIPLE CHOICE QUESTIONS):

For each of the questions (1) to (5) below there are four possible answers A, B, C and D.
Choose the one you consider correct and circle it.
1.

In a cash flow statement a bonus issue will:

(A) Be included in cash flow from investing activities.
(B) Be included in cash flow from financing activities.
(C) Not appear as no cash flow occurs as a result of a bonus issue.
(D) Be included as part of cash flow from operations.

2.

During the year ended 31 December, a company bought a new motor vehicle. The cost price
was $43 000. The company paid $37 000 by cheque and also traded in an old vehicle for which
it was allowed $6000. The depreciated book value of the old vehicle was $4200. The company
sold another vehicle for $3750 cash. This vehicle had a net book value of $4925.

What is the effect of these transactions on the cash flow of the company?
Cash inflow
$

3.

Cash outflow
$

4 925

33 250

3 750

37 000

9 750

43 000

10 925

43 000

A statement of cash flows must be analysed between operating, investing and financing
activities. What is a financing activity?

A Acquisition of non-current assets

B Issue of shares
C Sale of goods
D Sale of non-current assets

4.

A company has 100 000 ordinary shares of $1 each. During the year the following takes place.
1 The company pays an interim dividend of $0.10 per share.
2 The directors declare a final dividend of $0.20 per share to be paid after the end of the
financial year.
How are these reported in the financial statements?

(A)
5.

At the end of the year, the following information has been extracted from a companys statement
of cash flows.
$
Total cash from operating activities

200

Net cash used by investing activities

(300)

Net cash used by financing activities

(150)

Closing cash and cash equivalents

(50)

What was the opening figure for cash and cash equivalents?

A $(200)

B $(300)

C $200

D $300
[Total marks 5]

STATEMENT OF CASH FLOWS (STRUCTURED QUESTION):

The statement of financial position of Filbert Ltd as at 31 January 2014 (with comparative
figures for 2013) is as follows:
2014

Non-current assets:

Plant and equipment at cost

417,000

(-) Accumulated depreciation

223,600

Long-term investments at cost

2013

365,000
193,400

143,100

221,900

18,000

14,000

211,400

235,900

Current assets:
Inventories

186,300

195,700

Trade receivables

141,200

100,000

Other receivables

50,200

28,200

Short term investments

20,000

397,700

323,900

Trade payables

95,000

92,900

Other payables

8,500

7,500

Taxation

50,000

52,000

Bank overdraft

35,200

44,500

(-) Current liabilities:

Net current assets

209,000

127,000

420,400

362,900

Equity:
Ordinary shares of $0.50
8% Preference shares of $0.50

225,000
-

Capital redemption reserve

60,000

Share premium

30,000

General reserve
Retained earnings

150,000
100,000
30,000

25,000

55,400

57,900
370,400

362,900

Non-current liabilities:
10% Debentures

50,000
420,400

362,900

Additional information:
1

Total dividends of $58,000 were paid during the year to 31 January 2014. Dividends
received during the year were $1,600.

Plant and equipment with an original cost of $52,000 and accumulated depreciation of
$39,500 was sold during the year for $11,000.

The 10% Debentures was issued on 1st August 2013 and the interest was paid on 31
January 2014.

Bank overdraft interest paid for the year was $4,800.

Long term investments cost $5,000 were sold for $10,000.

At the end of the year company made a bonus issue of one share for every three shares
held. The company uses the revenue reserves for the issue.

8% Preference shares were redeemed at the end of the year at a price of $0.70. The
shareswere originally issued at $0.60. New shares were issued at $0.80 to provide funds
for redemption.

Required:
(a)

Calculation of profit from operations for the year ended 31 January 2014
$

[10]

(b)

Reconciliation of profit from operations to calculate the net cash flow from operating
activities.
$

[10]

(c)

Statement of cash flows for Filbert Ltd for the year to 31 January 2014
$

[15]
[Total marks 35]
9