IAS 7 Question 2
QUESTION 2: IAS 7 STATEMENTS OF CASH FLOWS
The summarized statements of financial position of Standard Inc at 31 December 2014 and 2015
are as follows.
2015 2014
$‘000 $000
Issued share capital 150,000 100,000
Share premium 35,000 15,000
Retained earnings 41,000 14,000
Long-term loans 30,000 70,000
Payables 48,000 34,000
Bank overdraft – 14,000
Tax payable 33,000 21,500
Proposed dividends 15,000 7,500
Depreciation
Plant and machinery 54,000 45,000
Fixtures and fittings 15,000 13,000
421,000 334,000
Freehold property at cost 130,000 110,000
Plant and machinery at cost 151,000 120,000
Fixtures and fittings at cost 29,000 24,000
Inventories 51,000 37,000
Trade receivables 44,000 42,800
Long-term investments 4,600 –
Cash at bank 11,400 200
421,000 334,000
The following information is relevant:
(a) There had been no disposal of freehold property in the year.
(b) A machine tool which had cost $8,000,000 (in respect of which $ 6,000,000 depreciation
had been provided) was sold for $3,000,000, and fixtures which had cost $5,000,000 (in
respect of which depreciation of $2,000,000 had been provided) were sold for $1,00,0000.
Profits and losses on those transactions had been dealt with through the statement of profit
or loss.
(c) The statement of profit or loss charge in respect of tax was $22,000,000.
(d) The premium paid on redemption of the long-term loan was $2,000,000, which has been
written off to the statement of profit or loss.
(e) The proposed dividend for 2014 had been paid during the year.
(f) Interest received during the year was $450,000. Interest charged in the statement of profit
or loss for the year was $6,400,000. Accrued interest of $440,000 is included in payables
at 31 December 2014 (nil at 31 December 2015).
(g) The government stock is a long term investment.
Required:
Prepare a cash flow statement for the year ended 31 December 2015, together with notes as
required by IAS 7.
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IAS 7 Question 2
ANSWER – QUESTION 2: IAS 7 STATEMENTS OF CASH FLOWS
STANDARD INC
Statement of cash flows
For the year ended 31 December 2015
Cash flows from operating activities: $ 000
Profit before tax W1 64,000
Adjustments for:
Depreciation of non-current assets W5 15,000 + W6 4,000 19,000
Loss on disposal W7 (2,000 – 1,000) 1,000
Finance income (450)
Finance costs (6,400 + 2,000) 8,400
Operating profit before working capital changes 91,950
Increase in inventory (37,000 – 51,000) (14,000)
Increase in trade receivables (42,800 – 44,000) (1,200)
Increase in trade payables (48,000 – 34,000 + 440) 14,440
Cash generated from operations 91,190
Interest paid (6,400 + 440) (6,840)
Income tax paid W8 (10,500)
Net cash from operating activities 73,850
Cash flows from investing activities:
Purchase of property, plant and equipment (W2 20,000+W3 39,000+W4 10,000) (69,000)
Acquisition of long term investment (4,600)
Proceeds from sale of asset W7 (P&M 3,000 + F&F 1,000) 4,000
Net cash used in investing activities (69,600)
Cash flows from financing activities:
Shares issued [150,000 + 35,000] – [100,000+15,000] 70,000
Payment to redeem long term loan [(70,000-30,000) + 2,000] (42,000)
Finance income received 450
Dividends paid (7,500)
Net cash from financing activities 20,950
Net increase in cash and cash equivalents 25,200
Cash and cash equivalents at beginning of period (200 – 14,000) (13,800)
Cash and cash equivalents at end of period 11,400
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IAS 7 Question 2
Workings:
W1 – Retained Earning
Taxation 22,000 b/d 14,000
Dividend 15,000 Profit before tax β 64,000
c/d 41,000
650 650
W2 – Freehold Property
b/d 110,000
Cash β 20,000 c/d 130,000
130,000 130,000
W3 – Plant & Machinery
b/d 120,000 Disposal 8,000
Cash β 39,000 c/d 151,000
700 700
W4 – Furniture & Fittings
b/d 24,000 Disposal 5,000
Cash β 10,000 c/d 29,000
34,000 34,000
W5 – Accumulated Depreciation – Plant & Machinery
Disposal 6,000 b/d 45,000
c/d 54,000 Depreciation β 15,000
60,000 60,000
W6 – Accumulated Depreciation – Furniture & Fittings
Disposal 2,000 b/d 13,000
c/d 15,000 Amortization β 4,000
17,000 17,000
W7 – Disposal A/C
P&M 8,000 Acc. Depreciation – P&M 6,000
F&F 5,000 Acc. Depreciation – F&F 2,000
Gain on P&M Disposal 1,000 Cash (P&M 3,000 + F&F 1,000) 4,000
Loss on F&F Disposal 2,000
14,000 14,000
W8 – Income Tax
Cash β 10,500 b/d 21,500
c/d 33,000 PL 22,000
1,050 43,500
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