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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:

  1. The depreciation expense is included in cost of sales.
  2. 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.
  3. The revaluation reserves were arising from revaluation of land. There is purchase, but no sale of land during the year.
  4. During the year, $18,000 debentures were settled by way of issuing 10,000 new ordinary shares. Other debentures repaid were by cash.
  5. All accounts payable relate to inventory purchases.
  6. The company declared dividends in 2015. Net income for 2015 is 402.
  7. Retained profits were affected only by net profit and dividends declared during the year.
  8. 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.

  1. 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):
  1. Add 140
  2. Add 240
  3. Add 380
  4. None of the above

  1. In the cash flow of operating activities, the adjustment for profit on disposal of fixed asset should be:
  1. Subtract 20.
  2. Add 20.
  3. Subtract 80
  4. Add 80.

  1. In the cash flows from investing activities, purchase of fixed asset (including both land and PPE) should be___.
  1. Subtract 580.
  2. Subtract 590.
  3. Subtract 710
  4. None of the above.

  1. In the cash flows from financing activities, repayment of debenture should be ___.
  1. Subtract 2.
  2. Subtract 20.
  3. Subtract 160.
  4. None of the above.

  1. In the cash flows from financing activities, dividend paid should be ___.
  1. Subtract 50.
  2. Subtract 282.
  3. Subtract 302.
  4. None of the above.

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