Question
The Statements of Financial Position of Dream Limited for the year ended 31 December 2015 are provided below: Dream Limited Statement of Financial Position as
The Statements of Financial Position of Dream Limited for the year ended 31 December 2015 are provided below:
Dream Limited | ||
Statement of Financial Position as at 31 December: | ||
| 2015 | 2014 |
| $000 | $000 |
Assets: |
|
|
Land | 350 | 200 |
PPE | 950 | 510 |
Accumulated depreciation | (380) | (240) |
| 570 | 270 |
Cash at bank | 20 | - |
Inventories | 110 | 200 |
Accounts receivable | 200 | 180 |
Total | 1,250 | 850 |
Liabilities: |
|
|
Accounts payable | 160 | 210 |
Bank overdraft | 0 | 20 |
Salary payable | 40 | 20 |
Tax payable | 80 | 60 |
Dividends Payable | 50 | 30 |
8% debenture | 160 | 180 |
Total | 490 | 520 |
Equity: |
|
|
Ordinary shares of $1 | 300 | 190 |
Share premium | 90 | - |
Retained profits | 240 | 140 |
Revaluation reserves | 130 | ---- |
Total | 760 | 330 |
Additional information:
- The depreciation expense is included in cost of sales.
- During the year, a machine costing $120,000 was sold for $40,000. The accumulated depreciation up to the date of disposal for this machine amounted to $100,000. The profit or loss on disposal of this machine was already included in operating profit for the year of 2015.
- The revaluation reserves were arising from revaluation of land. There is purchase, but no sale of land during the year.
- During the year, $18,000 debentures were settled by way of issuing 10,000 new ordinary shares. Other debentures repaid were by cash.
- All accounts payable relate to inventory purchases.
- The company declared dividends in 2015. Net income for 2015 is 402.
- Retained profits were affected only by net profit and dividends declared during the year.
- The company classified interest payment, dividend received and interest received as cash flow from operating activities and dividend payment as cash flow from financing activities.
Required:
The company prepares the cash flow statement for the year ended 31 December 2015, using indirect method. Please answer the following questions.
- In the cash flow of operating activities, the adjustment for depreciation expense should be (all numbers in thousands, for example, 100 means 100,000; same rule applies for MC question1-5):
- Add 140
- Add 240
- Add 380
- None of the above
- In the cash flow of operating activities, the adjustment for profit on disposal of fixed asset should be:
- Subtract 20.
- Add 20.
- Subtract 80
- Add 80.
- In the cash flows from investing activities, purchase of fixed asset (including both land and PPE) should be___.
- Subtract 580.
- Subtract 590.
- Subtract 710
- None of the above.
- In the cash flows from financing activities, repayment of debenture should be ___.
- Subtract 2.
- Subtract 20.
- Subtract 160.
- None of the above.
- In the cash flows from financing activities, dividend paid should be ___.
- Subtract 50.
- Subtract 282.
- Subtract 302.
- None of the above.
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