Question $2(25$ marks$)$

Win Win Top $("$WWT$")$ experienced a slight drop in the cash balance. You, as the

accountant of WVT$,$ are requested to analyze the impacts of cash flows for the year

ended $30$ June $2021$ with the following financial information of WWT:

Statement of profit or loss and other comprehensive income

for the year ended $30$ June $2021$

Additional information:

$(1)$ During the year ended $30$ June $2021,$ WWT disposed of equipment items with a

cost of $HK$$$14,000,000$ and accumulated depreciation of $HK$$$12,000,000.$ Further,

WWT acquired equipment items for its new division and settled all the purchases in

cash. WWT recorded depreciation of $HK$$$1,600,000$ which was included in selling

and administrative expenses. WWT measures all its equipment items using the cost

model in accordance with IFRS $16$ Property, Plant and Equipment.

$(2)$ During the year ended $30$ June $2021.$ WWT did not purchase additional long$-$term

investments. In accordance with IFRS $9$ Financial Instruments, WWT measures all its

long$-$term investments at fair value through profit or loss $($FVTPL$).$ WWT did not

receive any dividends from such investments during the year.

$(3)$ WWT did not have any borrowings throughout the years.

Required:

$($a$)$ Explain the term "cash equivalents" in accordance with IFRS $7$ Statement of Cash

Flows.

$($b$)$ In the preparation of the statement of cash flows of WWT for the year ended $30$

June $2021$ using the indirect method,

$($i$)$ identify $($a$)$ the non$-$cash items $($items other than changes in operating assets

and liabilities$)$ to be adjusted to net profit and state the effects of such

adjustments on net profit; and $($b$)$ the working capital items and state the

effects of the items on cash flows from operating activities.

$(6$ marks$)$

$($ii$)$ determine the following amounts and state how each item should be

presented and the cash flows effects in the statement of cash flows:

Disposal of equipment items;

Purchase of equipment items;

Issue of new shares;

Distribution of dividends; and

Tax payment.