(a) Chukwuka Nigeria Limited — Statement of cash flows for the year ended April 30, 2025 (Indirect method)

Operating activities: N’Million
Profit before taxation 18,315

Adjustments:
Finance cost 5,220
Interest (1,670)
Profit on investment disposal (385)
Loss on disposal 1,230
Depreciation (w4) 6,690
Insurance Premium (58) 11,027

Changes in working capital/operating assets and liabilities
Increase in inventories (11,550 – 7,875) (3,675)
Increase in receivables (31,440 – 25,335) (6,105)
Increase in payables (12,810 – 9,150) 3,660
(6,120)

Cashflow from operating activities 23,222

Less tax paid (w5) (10,320)

Net cash flow from operating activities 12,902

Investing activities
Interest received 1,670
Proceeds from investment disposal (w7) 1,885
Proceeds from van disposal (w8) 2,520
Acquisition of PPE (w6) (14,115)
Acquisition of intangible assets (w10) (2,475)
Acquisition of investment (w9) (475)

Net cash flow from investing activities (10,990)

Financing activities
Finance cost (5,220)
Proceeds from share issue- share capital (w11) 3,750
Share premium (w12) 1,200
Dividend paid (w1) (5,400)
Proceeds from loan note issued (w2) 6,280

Net cashflow from financing activities 610

Net cashflow for the year 2,522

Net cashflow at the beginning of the year (4,380)

Net cashflow at the end of the year (w3) 1,858

Workings (selected):

W1 Retained earnings
N‟M N‟M
Cash dividend 5,400 Bal b/f 13,860
Bal c/d 17,925 SOPL 9,465
23,325 23,325

W2 10% Loan notes
N‟M N‟M
Bal c/d 12,780 Bal b/f 6,500
______ 6,280
12,780 12,780

W3 Cash and cash equivalents as at April 30, 2025
N‟M
Short term investments 3,810
Cash in hand 930
Bank overdraft (6,540)
Insurance premium (58)
1,858

W4 Accm. depreciation account
N‟M N‟M
Disposal 2,850 Bal b/f 22,320
Bal c/d 26,160 SOPL 6,690
29,010 29,010

W5 Tax payables
N‟M N‟M
Cash 10,320 Bal b/f (IT) 8,460
Bal c/d (IT) 9,240 (DT) 3,750
(DT) 1,500 SOPL 8,850
21,060 21,060

W6a PPE accounts
N‟M N‟M
Bal b/f 23,475 Disposal 3,750
Rev. Res. (w6b) 2,085 Depreciation 6,690
Cash 14,115 Bal c/d 29,235
39,675 39,675

W6b Revaluation reserve
N‟M N‟M
Bal c/d 11,280 Bal b/f 9,195
______ PPE (w6a) 2,085
11,280 11,280

W7 Investment disposal
N‟M N‟M
Investment 1,500 Cash 1,885
SOPL 385 _____
1,885 1,885

W8 Van disposal account
N‟M N‟M
Cost 6,600 Van acc. Dep 2,850
Cash 2,520
_____ SOPL 1,230
6,600 6,600

W9 Trade investment
N‟M N‟M
Bal b/f 2,860 Disposal 1,500
Cash 475 Bal c/d 1,835
3,335 3,335

W10 Intangible assets
N‟M N‟M
Bal b/f 16,300 Bal c/d 18,775
Cash 2,475 
18,775 18,775

W11 Ordinary share capital
N‟M N‟M
Bal c/d 15,000 Bal b/f 11,250
______ Cash 3,750
15,000 15,000

W12 Share premium
N‟M N‟M
Bal c/d 10,500 Bal b/f 9,300
__Cash 1,200
10,500 10,500

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(b) IAS 7 — Cash and cash equivalents (answer)

Cash is cash in hand and deposit at bank while cash equivalent is defined as short term highly liquid investment that can be converted to a known amount of cash and is subject to an insignificant risk of changes in value.

Examples are:
i. Cash in hand;
ii. Cash at Bank;
iii. Bank overdraft; and
iv. Short term investment with a maturity day of not more than 90 days.

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(c) Exceptions to the rule regarding offsetting provided by IAS 1 (answer)

According to the provision of IAS 7 (note: solution references IAS 7 but lists IAS 1 exceptions), the following cash flows can be offset or reported on a net basis:

i. Cash receipts and payments on behalf of customers when the cash flows reflect the activities of the customer rather than those of the entity;

ii. Cash receipts and payments for items in which the turnover is quick, the amounts are large and the maturities are short (e.g., purchase and sale of short-term investments by an entity that trades in them frequently);

iii. For a financial institution, transactions to be offset or presented on a net basis are cash receipts and payments for deposits and cash receipts and payments for loans and advances;

iv. In IAS 12, deferred tax assets and liabilities are offset if, and only if, the entity has a legally enforceable right to offset current tax assets and current tax liabilities; and

v. In IAS 32, offsetting assets and liabilities occurs when financial instruments have legally enforceable rights to be netted, resulting in a single net amount being presented in the statement of financial position.