Cash Flow Questions

XYZ Inc., as part of its cash management activities, invested $10 million in redeemable preference shares (within three months from the date of their redemption). To do so, XYZ instructed its bank to use a maturing time deposit (a two-month fixed deposit) with the bank. Required Determine how XYZ Inc. would treat in its cash flow statement the cash outflows resulting from the investment of funds in redeemable preferred shares and the cash inflows resulting from the withdrawal of funds from the bank by using a maturing time deposit.

Cash Flow Questions

On January 1, 2004, Dramatic Inc. issued convertible bonds with conversion to take place on or before the expiry of two years from the date of issuance of the debt. On December 15, 2005, the board of directors of Dramatic Inc. decided to convert the bonds at year-end and issue equity shares. Required How would Dramatic Inc. treat this transaction in its cash flow preparation?

Cash Flow Questions

XYZ Inc. is preparing its cash flow statement under the direct method and has provided this information:
Net credit sales $5,000,000 Accounts receivable, end of the year 1,500,000 Accounts receivable, beginning of the year 2,500,000 Purchases (on account) 4,000,000 Trade payable, end of the year 1,900,000 Trade payable, beginning of the year 2,000,000 Operating expenses 3,000,000 Accrued expenses, beginning of the year 500,000 Accrued expenses, end of the year 400,000 Depreciation on property, plant, and equipment 600,000

Required For the purposes of the cash flow statement under the direct method, you are required to compute the cash collections from customers, payments to suppliers, and cash paid for operating expenses.

Cash Flow Questions

Financial information for Tremendous Enterprises Inc. for the year ended December 31, 2005, follows: Tremendous Enterprises Inc. BALANCE SHEETS As of December 31, 2005, and 2004
2005
Assets Cash and cash equivalents Trade receivables Inventory Intangible asset, net Due from associates Property, plant, equipment, cost Accumulated depreciation Property, plant, equipment, net Total assets Liabilities Accounts payable Income taxes payable Deferred taxes payable Total liabilities Shareholders equity Share capital Retained earnings Total shareholders equity Total liabilities and equity $ 4,500 7,500 3,000 1,500 28,500 18,000 (7,500) 10,500 $55,500 $ 7,500 3,000 4,500 15,000 9,750 30,750 40,500 $55,500

2004
$ 1,500 3,750 2,250 2,250 28,500 33,750 (9,000) 24,750 $63,000 $18,750 1,500 3,000 23,250 9,750 30,000 39,750 $63,000

Cash Flow Questions

Tremendous Enterprises Inc. STATEMENT OF INCOME For the Year Ended December 31, 2005

Sales Cost of sales Gross operating income Administrative and selling expenses Interest expenses Depreciation of property, plant, and equipment Amortization of intangible asset Investment income Net income before taxation Taxes on income Net income

$45,000 (15,000) 30,000 (3,000) (3,000) (3,000) (750) 4,500 24,750 (6,000) $18,750

Additional Information This additional information is relevant to the preparation of the statement of cash flows: 1. All sales made by Tremendous Enterprises Inc. (company) are credit sales. All purchases are on account. 2. Interest expense for the year 2005 was $3,000, which was fully paid during the year. 3. The company pays salaries and other employee dues before the end of each month. All administration and selling expenses incurred were paid before December 31, 2005. 4. Investment income comprised dividends income from investments in shares of blue chip companies. This was received before December 31, 2005. 5. Equipment with a net book value of $11,250 and original cost of $15,750 was sold for $11,250. 6. The company declared and paid dividends of $18,000 to its shareholders during 2005. 7. Income tax expense for the year 2005 was $6,000, against which the company paid $3,000 during 2005 as an estimate. Required Using the following financial information for Tremendous Enterprises Inc., prepare the cash flow statement according to the requirements of IAS 7 under both the direct and the indirect methods.