Question Tag: IAS 7

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FR – Nov 2022 – L2 – Q2 – Statement of Cash Flows

Prepare a statement of cash flows using the direct method for Obudu Nigeria Limited based on the given financial statements.

Question

Financial statements and extract from the cashbook of Obudu Nigeria Limited for the year ended December 31, 2020 are summarised below:
Obudu Nigeria Limited Statement of profit or Loss for the year ended December 31, 2020

Obudu Nigeria Limited Statement of financial position as at December 31

Other Information
(i) The 8% loan notes have been partly redeemed. It is expected that the full redemption will be made in five years time.
(ii) A cash payment for insurance of N1million was omitted in the cash book and other records.
(iii) The investments are not easily realisable.
Required:
a. Prepare the statement of cash flows for the year ended December 31, 2020 using the direct method in accordance with IAS 7. (9 Marks)
b. Prepare a statement of reconciliation of the operating profit to cash flow from operations. (5 Marks)
c. Discuss the benefits of statement of cash flows information to users of financial statements.

Answer

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Tags: Cash Flows, Cash Management, Direct Method, Financing Activities, IAS 7, Investing Activities, Operating Activities
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: NOV 2022

FR – May 2017 – L2 – SA – Q1 – Statement of Cash Flows

Prepare a cash flow statement for Bello Professional Nigeria Limited using the indirect method, discuss the direct method, and explain classification options for interest and dividends in cash flow statements.

Question

The following information relates to financial statements included in the annual report of Bello Professional Nigeria Limited.

Required

a. Prepare a statement of cash flow for Bello Professional Nigeria Limited for the year ended March 31, 2015, in accordance with IAS 7 using the indirect method. (18 Marks)

b. One of the directors at the annual general meeting suggested that the direct method of preparing cash flows is more useful. Comment on this view, providing your opinion. (7 Marks)

c. IAS 7 allows different classifications in cash flow statements. Explain the classification options for the following items:

i. Interest paid
ii. Dividends received
(5 Marks)

Answer

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Tags: Cash Flow Classification, Cash Flow Presentation, Direct vs Indirect Method, Financial Reporting, IAS 7, Statement of Cash Flows
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: MAY 2017

FR – May 2024 – L2 – SB – Q1 – Statement of Cash Flows

Prepare a statement of cash flows for Badary Plc using the direct method and discuss profitability, gearing, and investor's stake in Badary Plc.

Question

Additional Information:

(i) During the year ended March 31, 2021, plant and equipment with a carrying amount of N40,000,000 were sold for N55,000,000. The profit or loss on disposal was charged to distribution expenses.
(ii) Dividend of 2 kobo per share was paid in the year ended March 31, 2021, and there were also bonus issues.
(iii) Depreciation charged for the year was N10,000,000 on furniture and N30,000,000 on plant and equipment.
(iv) During the year, an investment that cost N12,500,000 some years ago was disposed of for N20,000,000. The profit or loss on disposal was charged to administrative expenses.
(v) Dividends received were from investments in shares and the immediate disposal of rights issues from the investment in a blue-chip company.

You are required to:
a. Prepare the statement of cash flows of Badary Plc for the year ended March 31, 2021, using the direct method in accordance with IAS 7. (20 Marks)
b. Discuss the profitability, gearing, and investor’s stake in Badary Plc and recommend strategies for improving or sustaining them. (10 Marks)

Answer

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Tags: Cash Flow, Financial Reporting, Gearing, IAS 7, Investor's Stake, Profitability analysis, Statement of Cash Flows
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: MAY 2024

FR – Nov 2015 – L2 – Q6 – Statement of Cash Flows (IAS 7)

Prepare the statement of cash flows and comment on cash flow management for Global Plc.

Question

Global Plc is an entity quoted on the Nigerian Stock Exchange. You are provided with the following set of summarized published financial statements of the company for the year ended September 30, 2014:

Statement of profit or loss and other comprehensive income for the year ended September 30, 2014

Item	N’000
Revenue	500,000
Cost of sales	(300,000)
Gross profit	200,000
Administrative expenses	(29,000)
Finance cost	(1,000)
Profit before taxation	170,000
Income tax expense	(40,000)
Profit for the period	130,000

Statement of financial position as at September 30, 2014

Item	2014 (N’000)	2013 (N’000)
Non-current assets
Property, plant, and equipment	200,000	220,000
Goodwill	–	10,000
Current assets
Inventories	100,000	80,000
Trade receivables	75,000	60,000
Bank balances	20,000	5,000
Total assets	395,000	375,000

Equity and Liabilities	2014 (N’000)	2013 (N’000)
Equity
Ordinary shares @ N1.25 each	10,000	8,000
Retained earnings	250,000	197,000
Total equity	260,000	205,000

The following information is relevant:

During the financial year, the company paid a dividend of N87,000,000 to equity holders, and this had been accounted for during the year. The current market price of the company’s shares is N10 per share.
The company is planning to take a long-term loan of N400,000,000 from a consortium of banks. The company’s financial statements and loan applications have already been submitted to the bank.

Answer

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Tags: Cash Flow, Direct Method, Financing Activities, IAS 7, Indirect Method, Operating Activities
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: NOV 2015

FR – May 2019 – L2 – Q2c – Statement of Cash Flows (IAS 7)

Discuss the advantages of the direct method of preparing a statement of cash flows over the indirect method.

Question

Discuss the advantages of the direct method of preparing a statement of cash flows over the indirect method.

Answer

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Tags: Cash Flow, Cash Flow Statement, Direct Method, IAS 7
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: MAY 2019

FR – May 2018 – L2 – Q3 – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows using the indirect method and reconcile cash equivalents with the statement of financial position.

Question

The statement of financial position of Abagana Plc as at July 31, 2016, and 2017 is shown below

Statement of Financial Position as at July 31

Additional Information:

Equipment costing N45,000 was sold in February 2017 for N15,000. The company depreciates equipment at 20% per annum on cost, with a full charge in the year of acquisition and none in the year of disposal.
Non-current asset investments costing N38,000 were sold during the year for N31,500.
Dividends received during the year amounted to N7,500. Dividends paid during the year totaled N150,000.
The 14% loan notes were redeemed in January 2017, and 12% loan notes were issued in July 2017.
The company issued N75,000 ordinary shares at a premium of 60 kobo per share in January 2017.
The net cash flow from operating activities using the indirect method is a deficit of N187,000.

Required: a. Prepare a statement of cash flows for the year ended July 31, 2017, in accordance with IAS 7, using the indirect method. (12 Marks)

b. Reconcile the total cash and cash equivalents shown by the statement of cash flows to the equivalent figures shown in the opening and closing statements of financial position. (5 Marks)

c. Comment briefly on the significance of the information provided by the statement of cash flows. (3 Marks)

Answer

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Tags: Cash Flows, Financing Activities, IAS 7, Indirect Method, Investing Activities, Operating Activities
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: MAY 2018

FA – Nov 2014 – L1 – SB – Q6b – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Preparing the statement of cash flows (indirect method) showing cash generated from operating activities.

Question

The financial data extracted from the books of Solomon Enterprises Limited for the year ended 31 December 2013 are as follows:

Particulars	N’000
Sales	55,924
Cost of sales	41,028
Selling and distribution expenses	2,748
Administration expenses	2,404
Interest expenses	1,528
Tax paid	1,584
Increase in inventories	11,868
Decrease in receivables	1,416
Increase in payables	4,944

Additional information:
Included in administration expenses are:
i. Depreciation charges for the year of N500,000
ii. Loss on disposal of assets of N48,000

Required:
Prepare the Statement of Cash Flows showing cash flow generated from operating activities using the indirect method. (11 Marks)
Show all workings.

Answer

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Tags: Cash Flow from Operations, Cash Flow Statement, IAS 7, Indirect Method
Level: Level 1

FA – Nov 2014 – L1 – SB – Q6a – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Defining operating, investing, and financing cash flows with two examples for each.

Question

a. In relation to the Statement of Cash Flows, define the following terms and give two examples in each case:

i. Operating Cash Flows
ii. Investing Cash Flows
iii. Financing Cash Flows
(Total 9 Marks)

Answer

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Tags: Cash Flow, Financing, IAS 7, Investing, Operating
Level: Level 1

FA – May 2016 – L1 – SA – Q20 – Regulatory Environment of Accounting

Identifying which activity is not an investing activity under IAS 7.

Question

Which of the following will NOT be regarded as an investing activity in relation to IAS 7 statement of cash flows?
A. Dividend received
B. Cash paid to acquire property, plant and equipment
C. Cash paid to acquire equities in other entities
D. Cash payment to supplier of goods and services
E. Proceeds from sale of property, plant and equipment

Answer

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Tags: Cash Flow, IAS 7, Investing Activities, Statement of Cash Flows
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: MAY 2016

FR – May 2017 – L2 – Q3 – Preparation of Financial Statements

Prepare a statement of cash flows for Haruna Ltd for the year ended 31 March 2017.

Question

The following information has been taken from the financial statements of Haruna Ltd, a listed company for the year ended 31 March 2017:

Statement of Profit or Loss and Other Comprehensive Income (extracts) for the year ended 31 March 2017:

Additional information:

i) During the year, Haruna Ltd issued both ordinary shares and redeemable preference shares for cash.

ii) Investments classified as current assets are held for the short term and are readily convertible into the stated amounts of cash on demand.

iii) During the year, Haruna Ltd sold plant and equipment with a carrying amount of GH¢840,500 for GH¢900,000. Total depreciation charges for the year amounted to GH¢1,100,000. Plant costing GH¢50,000 was purchased on credit, and the amount is included within trade and other payables.

iv) Trade and other payables include accrued interest of GH¢5,000 as at 31 March 2017 (2016: GH¢10,000).

v) Intangibles relate to development costs capitalised in accordance with IAS 38 Intangible Assets. Costs amounting to GH¢70,000 were capitalised during the year.

Required:
Prepare a Statement of Cash Flows for Haruna Ltd for the year to 31 March 2017 in accordance with IAS 7 Statement of Cash Flows.

Answer

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Tags: Cash Flows, Financing Activities, IAS 7, Investing Activities, Operating Activities, Statement of Cash Flows
Level: Level 2

Topic: Preparation of Financial Statements
Series: MAY 2017

FR – Nov 2018 – L2 – Q3b – Financial Statement Analysis

Explanation of four benefits of cash flow information to users of financial statements.

Question

An entity shall prepare a statement of cash flows in accordance with the requirements of IAS 7: Statement of Cash Flows and shall present it as an integral part of its financial statements for each period for which financial statements are presented.

Required:
Explain FOUR (4) benefits of cash flow information to users of financial statements.
(4 marks)

Answer

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Tags: Benefits of Cash Flow Information, Cash Flow, Financial Reporting, IAS 7
Level: Level 2

Topic: Financial Statement Analysis
Series: NOV 2018

FR – Nov 2018 – L2 – Q3a – Preparation of Financial Statements

Preparation of the statement of cash flows using the indirect method based on the financial statements of Conso Bank Ghana Ltd.

Question

The following financial statements relate to Conso Bank Ghana Limited for the year ended 31 December 2017:

Statement of Comprehensive Income for the year ended 31 December 2017

Description	Note	GH¢’000
Interest income	(iii)	364,524
Interest expense	(iv)	(107,571)
Net interest income		256,953
Fees and commission income		132,374
Fees and commission expense		(24,183)
Net fees and commission income		108,191
Other income	(v)	9,727
Operating income		374,871
Impairment charge on loans and advances		(93,492)
Operating expenses	(vi)	(169,317)
Profit before tax		112,062
Income tax expense		(33,617)
Profit for the year		78,445

Statement of Financial Position as at 31 December 2017

Description	Note	2017 (GH¢’000)	2016 (GH¢’000)
Assets
Cash and cash equivalents		577,767	752,303
Government securities		2,037,292	1,857,337
Advances to banks		214,875	107,407
Loans and advances to customers		1,190,782	1,145,133
Property and equipment	(vii)	139,889	123,936
Intangible assets	(viii)	18,131	12,162
Income tax asset		6,626	5,778
Total assets		4,185,362	4,004,056
Liabilities
Deposits from customers		3,368,406	3,078,071
Other liabilities and provisions		171,718	359,192
Total liabilities		3,540,124	3,437,263
Equity
Stated capital		100,000	100,000
Retained earnings		545,238	466,793
Total equity		645,238	566,793
Total liabilities and equity		4,185,362	4,004,056

Required:
Using the indirect method, prepare a statement of cash flows for the year ended 31 December 2017, in accordance with IAS 7: Statement of Cash Flows.
(16 marks)

Answer

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Tags: Cash Flow, Financial Reporting, Financing Activities, IAS 7, Investing Activities, Operating Activities
Level: Level 2

Topic: Preparation of Financial Statements
Series: NOV 2018

FR – Nov 2015 – L2 – Q3 – Preparation of Financial Statements, Financial Statement Analysis

This question requires preparing a cash flow statement for CL Ltd using IAS 7 and calculating the gross profit margin based on changes in purchase and selling prices.

Question

(a) CL Ltd is a wholesaler and retailer of office furniture. Extracts from the company’s financial statements are set out below:

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED:

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2015:

Description	Stated Capital	Capital Surplus	Income Surplus	Total
Balances b/f	8,500	2,500	15,800	26,800
Share issue	12,900	–	–	12,900
Comprehensive income	–	5,000	7,000	12,000
Dividends paid	–	–	(4,000)	(4,000)
Balances c/f	21,400	7,500	18,800	47,700

STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH:

Note:
Non-current assets
During the year, the company redesigned its display areas in all of its outlets. The previous displays had cost GHS10 million and had been written down by GHS9 million. There was an unexpected cost of GHS500,000 for the removal and disposal of the old display areas. Also, during the year, the company revalued the carrying amount of its property upwards by GHS5 million, and the accumulated depreciation on these properties of GHS2 million was reset to zero.
All depreciation is charged to operating expenses.

Required:
Prepare a statement of cash flows for CL Ltd for the year ended 31 March 2015 in accordance with IAS 7 – Statement of Cash Flows. (15 marks)

(b) The directors of CL Ltd are concerned at the deterioration in its bank balance and are surprised that the amount of gross profit has not increased for the year ended 31 March 2015. At the beginning of the current accounting period (i.e. on 1 April 2014), the company changed to importing its purchases from a foreign supplier because the trade prices quoted by the new supplier were consistently 10% below those of its previous supplier. However, the new supplier offered a shorter period of credit than the previous supplier (all purchases are on credit). In order to encourage higher sales, CL Ltd increased its credit period to its customers, and some of the cost savings (on trade purchases) were passed on to customers by reducing selling prices on both cash and credit sales by 5% across all products.

Required:
(i) Calculate the gross profit margin that you would have expected CL Ltd to achieve for the year ended 31 March 2015 based on the selling and purchase price changes described by the directors. (2 marks)

(ii) Comment on the directors’ surprise at the unchanged gross profit and suggest what other factors may have affected gross profit for the year ended 31 March 2015.

(3 marks)
(Total: 20 marks)

Answer

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Tags: Cash Flow Statement, Cost of Sales, Depreciation, Financial Analysis, Financing Activities, Gross Profit Margin, IAS 7, Operating Activities, Revenue, Working Capital
Level: Level 2

Topic: Financial Statement Analysis, Preparation of Financial Statements
Series: NOV 2015

Question Tag: IAS 7

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FR – Nov 2022 – L2 – Q2 – Statement of Cash Flows

Prepare a statement of cash flows using the direct method for Obudu Nigeria Limited based on the given financial statements.

FR – May 2017 – L2 – SA – Q1 – Statement of Cash Flows

Prepare a cash flow statement for Bello Professional Nigeria Limited using the indirect method, discuss the direct method, and explain classification options for interest and dividends in cash flow statements.

FR – May 2024 – L2 – SB – Q1 – Statement of Cash Flows

Prepare a statement of cash flows for Badary Plc using the direct method and discuss profitability, gearing, and investor's stake in Badary Plc.

FR – Nov 2015 – L2 – Q6 – Statement of Cash Flows (IAS 7)

Prepare the statement of cash flows and comment on cash flow management for Global Plc.

FR – May 2019 – L2 – Q2c – Statement of Cash Flows (IAS 7)

Discuss the advantages of the direct method of preparing a statement of cash flows over the indirect method.

FR – May 2018 – L2 – Q3 – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows using the indirect method and reconcile cash equivalents with the statement of financial position.

FA – Nov 2014 – L1 – SB – Q6b – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Preparing the statement of cash flows (indirect method) showing cash generated from operating activities.

FA – Nov 2014 – L1 – SB – Q6a – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Defining operating, investing, and financing cash flows with two examples for each.

FA – May 2016 – L1 – SA – Q20 – Regulatory Environment of Accounting

Identifying which activity is not an investing activity under IAS 7.

FR – May 2017 – L2 – Q3 – Preparation of Financial Statements

Prepare a statement of cash flows for Haruna Ltd for the year ended 31 March 2017.

FR – Nov 2018 – L2 – Q3b – Financial Statement Analysis

Explanation of four benefits of cash flow information to users of financial statements.

FR – Nov 2018 – L2 – Q3a – Preparation of Financial Statements

Preparation of the statement of cash flows using the indirect method based on the financial statements of Conso Bank Ghana Ltd.

FR – Nov 2015 – L2 – Q3 – Preparation of Financial Statements, Financial Statement Analysis

This question requires preparing a cash flow statement for CL Ltd using IAS 7 and calculating the gross profit margin based on changes in purchase and selling prices.

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Question Tag: IAS 7

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FR – Nov 2022 – L2 – Q2 – Statement of Cash Flows

Prepare a statement of cash flows using the direct method for Obudu Nigeria Limited based on the given financial statements.

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FR – May 2017 – L2 – SA – Q1 – Statement of Cash Flows

Prepare a cash flow statement for Bello Professional Nigeria Limited using the indirect method, discuss the direct method, and explain classification options for interest and dividends in cash flow statements.

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FR – May 2024 – L2 – SB – Q1 – Statement of Cash Flows

Prepare a statement of cash flows for Badary Plc using the direct method and discuss profitability, gearing, and investor's stake in Badary Plc.

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FR – Nov 2015 – L2 – Q6 – Statement of Cash Flows (IAS 7)

Prepare the statement of cash flows and comment on cash flow management for Global Plc.

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FR – May 2019 – L2 – Q2c – Statement of Cash Flows (IAS 7)

Discuss the advantages of the direct method of preparing a statement of cash flows over the indirect method.

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FR – May 2018 – L2 – Q3 – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows using the indirect method and reconcile cash equivalents with the statement of financial position.

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FA – Nov 2014 – L1 – SB – Q6b – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Preparing the statement of cash flows (indirect method) showing cash generated from operating activities.

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FA – Nov 2014 – L1 – SB – Q6a – Financial Statements (Preparation of Statement of Profit or Loss, Statement of Financial Position, Cash Flow Statement, and Statement of Changes in Equity)

Defining operating, investing, and financing cash flows with two examples for each.

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FA – May 2016 – L1 – SA – Q20 – Regulatory Environment of Accounting

Identifying which activity is not an investing activity under IAS 7.

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FR – May 2017 – L2 – Q3 – Preparation of Financial Statements

Prepare a statement of cash flows for Haruna Ltd for the year ended 31 March 2017.

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FR – Nov 2018 – L2 – Q3b – Financial Statement Analysis

Explanation of four benefits of cash flow information to users of financial statements.

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FR – Nov 2018 – L2 – Q3a – Preparation of Financial Statements

Preparation of the statement of cash flows using the indirect method based on the financial statements of Conso Bank Ghana Ltd.

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FR – Nov 2015 – L2 – Q3 – Preparation of Financial Statements, Financial Statement Analysis

This question requires preparing a cash flow statement for CL Ltd using IAS 7 and calculating the gross profit margin based on changes in purchase and selling prices.

You're reporting an error for "FR – Nov 2015 – L2 – Q3 – Preparation of Financial Statements, Financial Statement Analysis"

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