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Tutorial Questions - Week 6

The document contains 5 questions regarding the statement of cash flows. Question 1 asks to classify various cash flow items into operating, investing or financing activities. Question 2 provides cash flow information for a company and asks to prepare a statement of cash flows. Question 3 asks about calculating profit under the cash basis vs accrual basis and which provides more useful information. Question 4 provides transactions for a company and asks to determine cash received/paid under cash accounting and net cash for the period. Question 5 asks to explain the relationship between profit and cash flow to help understand why there can be a difference between profit and cash in the bank.

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Arwa Ahmed
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83 views

Tutorial Questions - Week 6

The document contains 5 questions regarding the statement of cash flows. Question 1 asks to classify various cash flow items into operating, investing or financing activities. Question 2 provides cash flow information for a company and asks to prepare a statement of cash flows. Question 3 asks about calculating profit under the cash basis vs accrual basis and which provides more useful information. Question 4 provides transactions for a company and asks to determine cash received/paid under cash accounting and net cash for the period. Question 5 asks to explain the relationship between profit and cash flow to help understand why there can be a difference between profit and cash in the bank.

Uploaded by

Arwa Ahmed
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Week 6 Statement of cash flows

ACW1200

Discussion questions (Atrill et al 7th edition, 2018)


6.3 Identify the three categories of the sources (uses) of cash used in the
statement of cash flows.
6.7 What information does the cash flow statement provide that is not
available from the statement of financial position or the statement of
financial performance?
Additional Questions
Question 1
For each of the items listed below, classify the cash flows into operating, investing or
financing activities:
a. Payment of income taxes
b. Cash lent to borrowers
c. Payment of the electricity account
d. Money received from a customer
e. The purchase for cash of some equipment
f. The payment of a long-term liability
g. Payment of interest
h. The receipt of money from newly acquired loan

Question 2
Using the following information on cash flows for Peoria Berhad, prepare a statement of
cash flows for Peoria for the year ended 31 December 2016.
RM (in thousand)
Cash collections from customers 1,200
Cash payments to suppliers 748
Cash payment for operating expenses 85
Cash paid for interest 25
Payment for taxes 170
Acquisition of land 150
Acquisition of plant and equipment 200
Additional long-term borrowings 50
Issuance of common stock 150
Cash balance, January 1, 2016 90
Question 3
In its first year of operations, Tang Bhd generated RM78,000 for services provided,
RM12,000 of which was on account and still outstanding at year-end. The remaining
RM66,000 was received in cash from customers.
The company incurred operating expenses of RM45,000. Of these expenses RM40,500 were
paid in cash; RM4500 was still account at year-end. In addition, Tang paid in advance
RM6500 for insurance coverage that would not commence until the second year of
operations.
Required:
1. Calculate the first year’s profit under the cash basis accounting and the accrual basis
accounting.
2. Which basis of accounting provides more useful information for decision makers?

Question 4
Chomell Bhd commences on 1 January 2016. The company is preparing its 6-month income
statement for the period ended 30 June 2016. The following transactions took place during
the first six months of the operation
1. Purchase inventory for RM10,000, paid in cash. Assuming the inventory was sold
by the end of June 2016.
2. Sales of RM200,000 were made, of which 80% were paid in cash by the end of
June.
3. Rent was paid, amounting to RM21,000, which covered the period to the end of
July 2016.
4. Depreciation amount for all non-current assets are RM55,000.
5. Insurance was paid for the year, amounting to RM2,000.
6. Electricity bills were received and paid for the period ending 30 April,
amounting to RM800. No other bills were received by the end of the six months.
7. A number of subscriptions were received which cover the entire year,
amounting to RM2,000.

Required:
i. Determine the amount of cash received/paid under cash accounting.
ii. Determine the net cash for Chomell Bhd for the 6 (six) months period ended
30 June 2016.

Cash accounting
Transactions
RM
example 120 (outflow)
1
2
3
4
5
6
7
Profit(Loss)/
Net cash

Question 5
“We made a profit of $130,000, so why is there only $3,000 in the bank?”, exclaimed Mr.
Smith, the owner of Medley Pty Ltd. Explain to Mr. Smith the relationship between profit
and cash flow, to help him understand the reason why there is such a big difference
between profit and cash in the bank.

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