ACCT1511 Study Guide - Quiz Guide: Income Tax, Income Statement, Ob River
1
Topic 4 Seminar Question Answers
Q1: Final Exam – Semester 2, 2007 - Question 1 adapted
Darby Ltd.
Cash Flow statement
For Year Ended 30 June 2006
$’000 $’000
Cash flows from operations
Receipts from customers 1,492
Receipts from dividends 5
Payments to suppliers (1,059)
Payments for insurance (9)
Payments for interest expense (25)
Payments for other expenses (80)
Payments for income tax (75)
Cash Flows from Operations 249
Cash Flows from Investing Activities
Proceeds from sale of land 42
Proceeds from sale of buildings 77
Cash paid for purchase of investments (45)
Cash paid for purchase of land (53)
Cash paid for purchase of buildings (50)
Cash Flows from Investing Activities (29)
Cash Flows from Financing Activities
Proceeds from mortgage
75
Proceeds from share issue
56
Repayment of short-term loan
(11)
Redemption of bonds
(150)
Cash paid for dividends
(27)
Cash Flows from Financing Activities
(57)
Net Cash Flows 163
Cash balance at the beginning 66
Cash balance at the end 229
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WORKINGS:
Accounts Receivable
Allowance for Doubtful Debts
DR
CR
DR
CR
o/b
128
11
ADD
A/c Rec
11
12
o/b
sales
1,520
1,492
CASH
15
145
c/b
c/b
16
1,648
1,648
27
27
Accounts Payable
Inventory
DR
CR
DR
CR
51
o/b
o/b
190
1,110
COGS
CASH
1,059
1,095
purchases
1,095
c/b
87
175
c/b
1,146
1,146
1,285
1,285
Acc. Depreciation - Buildings
Acc. Depreciation - Equipment
DR
CR
DR
CR
43
81
o/b
149
o/b
c/b
75
37
Exp.
c/b
214
65
Exp.
118
118
214
214
TOTAL Depreciation expense: 37 + $65 = $102;
Other expenses cash only = 198 – 102 = 96
Accrued Expenses
Income Tax Payable
DR
CR
DR
CR
CASH
80
11
o/b
CASH
75
23
o/b
c/b
27
96
Exp.
c/b
15
67
Exp.
107
107
90
90
Note: Insurance Expense in the Income statement is = cash paid for insurance ($9,000) as there are no
prepaid insurance or insurance payable accounts in the balance sheet.
Land
Buildings
DR
CR
DR
CR
o/b
149
o/b
225
89
Sale
Revalue
30
60
Sale
Purchase
53
172
c/b
Purchase
50
186
c/b
232
232
275
275
Cash DR 42,000
Loss on Disposal DR 18,000
Land CR 60,000
Cash DR 77,000
Acc. Depreciation DR 43,000
Gain on Sale of Buildings CR 31,000
Buildings CR 89,000
Document Summary
Q1: final exam semester 2, 2007 - question 1 adapted. Total depreciation expense: 37 + = ; Note: insurance expense in the income statement is = cash paid for insurance (,000) as there are no prepaid insurance or insurance payable accounts in the balance sheet. Q2: using the indirect method prepare the reconciliation of net profit for cash flows from. The following diagram depicts a typical pattern of cash flows and income for a firm over its lifecycle. Provide a reason for your answer. (2 marks) Line #1 represents cash flows in financing (cff). During the inception and growth stages, cash has to come from external financing since cash from operating is unlikely to be strong enough to finance the capital expenditure required, and therefore, cff will be positive. Or at maturity, as cash from operating is strong and capital expenditure low, the need for external financing will be low.
