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    Exercise 17.11 Solution

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    raphaelrachel
    The document provides financial information for Denim Ltd for the year ended 30 June 2019 and requests the preparation of a statement of cash flows using the direct method. The statement of cash flows shows: 1) Net cash from operating activities of $46,000, which is cash generated from operations of $71,000 less interest paid of $4,000 and income tax paid of $21,000. 2) Net cash used in investing activities of $25,000 for the purchase of plant. 3) Net cash from financing activities of $17,000, which is proceeds from borrowings of $40,000 less dividend paid of $23,000.

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    Exercise 17.11 Solution

    Uploaded by

    raphaelrachel
    282 views3 pages
    The document provides financial information for Denim Ltd for the year ended 30 June 2019 and requests the preparation of a statement of cash flows using the direct method. The statement of cash flows shows: 1) Net cash from operating activities of $46,000, which is cash generated from operations of $71,000 less interest paid of $4,000 and income tax paid of $21,000. 2) Net cash used in investing activities of $25,000 for the purchase of plant. 3) Net cash from financing activities of $17,000, which is proceeds from borrowings of $40,000 less dividend paid of $23,000.

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    The document provides financial information for Denim Ltd for the year ended 30 June 2019 and requests the preparation of a statement of cash flows using the direct method. The statement of cash flows shows: 1) Net cash from operating activities of $46,000, which is cash generated from operations of $71,000 less interest paid of $4,000 and income tax paid of $21,000. 2) Net cash used in investing activities of $25,000 for the purchase of plant. 3) Net cash from financing activities of $17,000, which is proceeds from borrowings of $40,000 less dividend paid of $23,000.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    282 views3 pages

    Exercise 17.11 Solution

    Uploaded by

    raphaelrachel
    The document provides financial information for Denim Ltd for the year ended 30 June 2019 and requests the preparation of a statement of cash flows using the direct method. The statement of cash flows shows: 1) Net cash from operating activities of $46,000, which is cash generated from operations of $71,000 less interest paid of $4,000 and income tax paid of $21,000. 2) Net cash used in investing activities of $25,000 for the purchase of plant. 3) Net cash from financing activities of $17,000, which is proceeds from borrowings of $40,000 less dividend paid of $23,000.

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    of 3

    Exercise 17.

    11

    Preparation of a statement of cash flows

    A summarised comparative statement of financial position of Denim Ltd is presented


    below, together with the statement of profit or loss and other comprehensive income for
    the year ended 30 June 2019.

    Additional information
     There were no disposals of investments or plant during the year.
     A dividend of $23  000 was paid during the year.
     The deferred tax liability is in relation to investments.
    Required
    Using the direct method of presenting cash flows from operating activities, prepare a
    statement of cash flows in accordance with AASB 107/IAS 7 for the year ended 30 June
    2019. (LO3 and LO5)

    2018 2019 Increase


    (decrease)
    $ $ $
    Cash 30 000 68 000 38 000
    Trade receivables 46 000 70 000 24 000
    Inventory 30 000 32 000 2 000
    Investments 35 000 40 000 5 000
    Plant 125 000 150 000 25 000
    Accumulated depreciation (23 000) (35 000) 12 000
    243 000 325 000
    Accounts payable 39 000 43 000 4 000
    Accrued interest 3 000 5 000 2 000
    Current tax payable 10 000 12 000 2 000
    Deferred tax liability - 1 500 1 500
    Borrowings 60 000 100 000 40 000
    Share capital 100 000 100 000 -
    Retained earnings 31 000 60 000 29 000
    Investment revaluation reserve - 3 500 3 500
    243000 325000
    Receipts from customers:
    Sales 700 000
    Increase in receivables (24 000)
    Cash received 676 000

    Payments to suppliers and employees


    Cost of sales 483 000
    Other expenses:
    Distribution costs 62 000
    Administration costs 74 000
    Depreciation (12 000) 124 000
    Increase in inventory 2 000
    Increase in accounts payable (4 000)
    Total payments 605 000

    Interest paid
    Interest expense 6 000
    Increase in accrued interest (2 000)
    Interest paid 4 000
    Income tax paid
    Income tax expense 23 000
    Increase in tax payable (2 000)
    Income tax paid 21 000
    Investments
    Revaluation gain net of tax 3 500
    Increase in deferred tax liability 1 500
    Purchase of investments -
    Increase in investments $5 000

    Explanations:
     The increase in deferred tax liability is the tax effect of the revaluation increment, as per
    the additional information.
     As the increase in investments can be explained by the revaluation, and there were no
    disposals of investments, we can conclude that there were no purchases of investments
    during the year.
     The purchases of plant are determined as the increase in plant in the absence of any
    disposals of plant during the year.

    Denim Ltd
    Statement of Cash Flows
    for the year ended 30 June 2019

    Cash flows from operating activities $


    Receipts from customers 676 000
    Payments to suppliers and employees (605 000)
    Cash generated from operations 71 000
    Interest paid (4 000)
    Income tax paid (21 000)
    Net cash from operating activities 46 000

    Cash flows from investing activities


    Purchase of plant (25 000)
    Net cash used in investing activities (25 000)

    Cash flows from financing activities


    Proceeds from borrowings 40 000
    Dividend paid (23 000)
    Net cash from financing activities 17 000
    Net increase in cash and cash equivalents 38 000
    Cash and cash equivalents at beginning of year 30 000
    Cash and cash equivalents at end of year $68 000

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