Tutorial Solutions - Topic € 9 CU STEEN 2S) ANSWERS TO QUESTIONS 1. The statement of cash flows answers the following questions about cash: (a) Where did the cash come from during the period? (b) What was the cash used for during the period? (©) What was the change in cash balance during the period? 2. The three activities are Operating activities include the cash effects of revenue generating activities (such as the provisions of goods and services) and activities that are not classified as financing of investing activities Investing activities include: (a) acquiring and disposing of investments and productive long-lived assets () lending money and collecting loans, Financing activities inolude: (a) obtaining cash from issuing debt and repaying the amounts borrowed {b) obtaining cash from shareholders and providing them with a return on their investment (paying dividends). 7. Anumber of factors could have caused an increase in cash despite the loss for the period. These are: (1) high cash revenues relative to low cash expenses (2) sales of property, plant, and equipment (3) sales of investments (4) issue of debt or shares for cash. 8. Any five of the following: Depreciation expense. Gain or loss on sale of a non-current asset Increase/decrease in accounts receivable. Increase/decrease in accounts payable. Increase/decrease in inventory. Increase/decrease in prepayments. Increase or decrease in accrued expenses. Increase/decrease in income tax payable. ‘Finandal Accouning __—___TutovalSotiions-Tope———SSCSCS~S~S~S*«é gO Fepriniod wih parmissin of John Wiley & Sons, IncSMSO cass) EXERCISE 11.1 @. Li Eng Ltd Reconciliation of profit after tax to cash provided by operating activities {a) __Noncash investing and financing activities. {b) Financing activities. (0) Operating activities, {d) Financing activities {e) Investing activities. {f) _Noncash investing and financing activities (a) Operating activities, b). Operating activities are the entity's principal revenue-generating activities such as the provision of goods and services and activities which are not classified as investing or financing activities. Investing activities are the acquisition and disposal of long-term assets, including activities such as purchasing and selling of non-current assets, and lending money and collecting the loans, Financing activities are those that affect the size and composition of contributed equity and borrowing, and include obtaining cash from issuing debt, repaying the amounts borrowed, obtaining cash from shareholders, and paying them dividends or buying back shares/ EXERCISE 11.2 Pesci Ltd Cash flows from operating activities: Profit $200,000 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation expense $35,000 Increase in accounts receivable (15,000) Increase in accounts payable 8,000 Increase in prepaid expenses (6,000) Loss on sale of equipment 5,000 __28,000 Net cash provided by operating activities $228,000 Finance Recourtng Tataral Satan Tepe - Page zoe Rept with pormission of John Wiley & Sons, InEXERCISE 11.4 (a) Thorpes Tubing Pty Ltd ‘Statement of Cash Flows for the year ended 30 June 2012 Cash flows from operating activities: Cash receipts from customers $969,000 (1) Cash payments: To suppliers $532,000 (2) For other operating expenses 261,000 (3) For interest 15,000 For income taxes 45,000 853,000 Net cash provided by operating activities 116,000 Cash flows from investing activities: Sale of land 25,000 Purchase of equipment {60,000} Net cash used by investing activities, (35,000) Cash flows from financing activities: Repayment of notes payable (50,000) Issue of shares 50,000 Payment of dividends (43,000) Net cash used by financing activities (43,000) Net increase in cash 38,000 Cash at beginning of period 22,000 Cash at end of period ‘$90,000 Computations: (1) Cash receipts from customers: Sales $978,000 Deduct: Increase in accounts receivable (9.000) Cash receipts from customers $969,000 (2) Cash payments to suppliers: Cost of sales $528,000 Deduct: Decrease in inventory (9,000) Cost of purchases 519,000 ‘Adg: Decrease in accounts payable 13,000 Cash payments to suppliers $532,000 Fanci Rezoning “Tua SoaTars Tepes Page Sore ‘epnted with permission of Jot Wey & Sans, Ine(3) Cash payments for operating expenses: Total expenses 873,000 Deduct: COS (628,000) Depreciation * (24,000) interest expense (15,000) Tax expense (45,000) Cash payments for operating expenses $261,000 * Inthe absence of any disposals of depreciated assets the change in Accumulated Depreciation is the depreciation expense EXERCISE 11.6 Leslie Mills Pty Ltd Revenues $170,000 Deduct:. increase in accounts receivable (43,000) Cash receipts from customers* $127,000 Operating expenses 80,000 Deduct: Increase in accounts payable (33,000) Bad debts expense 1,000) Cash payments for operating expenses** 46,000 Net cash provided by operating activities ‘$81,000 *Accounts Receivable Balance, Beginning of year - Revenues for the year 470,000 | Cash receipts for year 127,000 | Closing Balance 43,000 | 170,000 120,000 Opening Balance 43,000 **Accounts Payable Balance, Beginning of year - Payments for year 46,000 | Operating expenses for year 79,000 Closing Balance 33,000 79,000 79,000 Opening Balance 33,000 Operating expenses are $79,000 in the reconstruction of Accounts Payable because $1000 of the total operating expenses of $80,000 was for the bad debts expense, a non-cash item, | FirandialAccouning ____TulovaSoufons-Topie ——=~SC*~*~*~S~S«~ GT FRoprnted with porns of John Wiley & Sons, InoEXERCISE 11.8 Flypaper Airlines Ltd Partial Statement of Cash Flows for the year ended 31 December 2012 Cash flows from operating activities Cash receipts from: Customers *$250,000 Dividends on investment 14,000 264,000 Cash payments: To suppliers for inventory $100,000 For operating expenses 20,000 For salaries and wages 68,000 For interest 15,000 For income taxes 16,000 219,000 Net cash provided by operating activities $45,000 “$60,000 + $190,000 See eee SETA PROBLEM SET A 11.5 fa) Tasman Oak Ltd ‘Statement of Cash Flows for the year ended 31 March 2013 Cash flows from operating activities: Cash receipts from customers $284,200 (1) Cash payments: To suppliers $100,410 (2) For operating expenses 15,110 (3) For income taxes 7,000 For interest 2,230 124,750) Net cash provided by operating activities 159,450, Cash flows from investing activities: Purchase of investments (14,000) Sale of machinery 1,500 Purchase of machinery (85,000) Net cash used by investing activities (97,500) “Financlal Rocounting ———_ Tworial Solutions-Topie@=—=S=*é—‘SéS*«éR Age Te Reprinted wih permission of Jon Wiley & Son, InoCash flows from financing activities: Issue of shares 35,000 Redemption of debentures (15,000) Payment of cash dividends (22,350) Net cash used by financing activities (2,350) Net increase in cash 59,600 Cash at beginning of period 38,400 Cash at end of period ‘$98,000 Computations: (1) Cash receipts from customers: Sales $342,000 Deduct: Increase in accounts receivable (57,800) Cash receipts from customers $284,200 (2) Cash payments to suppliers: Cost of sales $115,460 ‘Add: Increase in inventory 9,850 Cost of purchases 125,110 Deduct: Increase in accounts payable 24,700) Cash payments to suppliers $100,410 (3) Cash payments for operating expenses: Operating expenses excluding depreciation $12,410 ‘Add: Increase in prepaid expenses $2,400 Decrease in accrued expenses payable 300 2,700 Cash payments for operating expenses $15,110 (b) Tasman Oak Ltd Note to Statement of Cash Flows (indirect method) for the year ended 31 March 2013 Reconciliation of profit to cash provided by operating activities, Cash flows from operating activities: Profit $150,900 Adjustments to reconeile profit to net cash provided by operating activities: Depreciation expense $46,500 Loss on sale of machinery 7,500 Financia Racouning “Tara Sotaons Tope Pagesee Repinid with permission of John Wl & Sons, InoTnorease in accounts receivable (87,800) Increase in inventory (9,650) Increase in accounts payable 24,700 Decrease in accrued expenses payable (300) Increase in prepaid expenses 2,400) 8.550 Net cash provided by operating activities $159,450 PROBLEM SET A 11.9 (a) WA Manufacturing Pty Ltd Statement of Cash Flows for the year ended 30 June 2014 Cash flows from operating activities: Reprint with permission of John Wley & Sons, Ino Cash receipts from customers $270,200 (1) Cash payments: To suppliers $114,290 (2) For operating expenses 21,400 (3) For income taxes 7,270 | For interest 5.440 148,400 | Net cash provided by operating activities $121,800 Cash flows from investing activities: Sale of investments 2,400 Sale of plant and equipment 15,550 Purchase of plant and equipment (92,000) (4) Net cash used by investing activities (74,050) Cash flows from financing activities: | Proceeds from issue of shares 50,000 Proceeds from issue of debentures 30,000 Payment of cash dividends 80,000 Net cash provided by financing activities nil Net increase in cash 47,750 Cash at beginning of period 47,250 Cash at end of period $95,000 Farell Accounting Tura Soaians Tape G rag TTT |Computations: (1) Cash receipts from customers: Sales $300,000 Deduct: Increase in accounts receivable 29,800) Cash receipts from customers $270,200 (2) Cash payments to suppliers: Cost of sales $99,460 Add: Increase in inventory 19.250 Cost of purchases 118,710 Deduct: Increase in accounts payable 4,420} Cash payments to suppliers $114,290 (3) Cash payments for operating expenses: Operating expenses $14,670 ‘Add: Decrease in accrued expenses payable 6.730 Cash payments for operating expenses $21,400 (4) Plant and Equipment Balance, Beginning of year 205,000 | Equipment sold 47,000 Cash (purchase of equipment) 92,000 | Closing Balance 250,000 297,000 297,000 Opening Balance 250,000 (o) WA Manutacturing Pty Ltd Note to Statement of Cash Flows (Indirect Method) for the year ended 30 June 2014 Reconciliation of profit to cash provided by operating activities, Cash flows from operating activities: Profit $132,210 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation expense $49,700 Gain on sale of equipment (8,750) Inctease in accounts receivable (29,800) Increase in inventory (19,250) Increase in accounts payable 4,420 Decrease in accrued expenses payable (6,730) 10.410) Net cash provided by operating activities $121,800 Francia Resoontng Tai Staion TORE Page soe FRoprinted with persion of John Wiley & Sons, Ine