CIS FINANCIAL ACCOUNTIG 1.1 CONTACT NUMBER 08038400843 CONTACT HOURS TUESDAYS AND FRIDAY 6PM 7PM WEEK 7- CASH FLOW STATEMENT & ACCOUNTING FOR LIABILITIES / BONDS CHAPTER 11 & 12. MULTIPLE CHOICE 1. Which Statement of Accounting Standard (SAS) requires listed companies to prepare Cash Flow Statements? A. SAS 15 B. SAS 16 C. SAS 18 D. SAS 20 E. SAS 22 2. An entity purchases a building and the seller accepts payment partly in equity shares and partly in debentures of the entity. This transaction should be treated in the statement of cash flows as follows: a. The purchase of the building should be investing cash outflow and the issuance of shares and the debentures financing cash outflows. b. The purchase of the building should be investing cash outflow and the issuance of debentures as financing cash outflows while the issuance of shares as investing cash outflow. c. This does not belong in a cash flow statement and should be disclosed only in the footnotes to the financial statements. d. Ignore the transaction totally since it is a noncash transaction. No mention is required in either the cash flow statement or anywhere else in the financial statements. 3. An entity (other than a financial institution) receives dividends from its investment in shares. How should it disclose the dividends received in the statement of cash flows prepared under IAS 7? a. Operating cash inflow. b. Either as operating cash inflow or as investing cash inflow. c. Either as operating cash inflow or as financing cash inflow. d. As an adjustment in the operating activities section of the cash flow because it is included in the net income for the year and as a cash inflow in the financing activities section of the cash flow statement. www.starrygoldacademy.com Page 1
4. How should gain on the sale of an office building owned by the entity be presented in a statement of cash flows? a. As an inflow in the investing activities section of the cash flow because it pertains to a long-term asset. b. As an inflow in the financing activities section of the statement of cash flows because the building was constructed with a long-term loan from a bank that needs to be repaid from the sale proceeds. c. As an adjustment to the net income in the operating activities section of the statement of cash flows prepared under the indirect method. d. Added to the sale proceeds and presented in the investing activities section of the statement of cash flows. 5. How should an unrealized gain on foreign currency translation be presented in a statement of cash flows? a. As an inflow in the financing activities section of the statement of cash flows because it arises from a foreign currency translation. b. It should be ignored for the purposes of the statement of cash flows as it is an unrealized gain. c. It should be ignored for the purposes of the statement of cash flows as it is an unrealized gain but it should be disclosed in the footnotes to the financial statements by way of abundant precaution. d. As an adjustment to the net income in the operating activities section of the statement of cash flows. 6. How should repayment of a long-term loan comprising repayment of the principal amount and interest due to date on the loan be treated in a statement of cash flows? a. The repayment of the principal portion of the loan is a cash flow belonging in the investing activities section; the interest payment belongs either in the operating activities section or the financing activities section. b. The repayment of the principal portion of the loan is a cash flow belonging in the investing activities section; the interest payment belongs either in the operating activities section or the investing activities section. c. The repayment of the principal portion of the loan is a cash flow belonging in the investing activities section; the interest payment belongs in the operating activities section (because IAS 7 does not permit any alternatives in case of interest payments). d. The repayment of the principal portion of the loan is a cash flow belonging in the investing activities section; the interest payment should be netted against interest received on bank deposits, and the net amount of interest should be disclosed in the operating activities section. www.starrygoldacademy.com Page 2
7. The statement of cash flows is universally accepted and required under GAAP and IFRS. Specifically, IAS 7 encourages two methods of preparation referred to as: A. Opening and closing methods B. Fund and cash methods C. Direct and indirect methods D. Part year and full year methods E. Acquisition and merger methods 8. Which of the following would appear in a company s statement of cash flows? A. Proposed dividend B. Dividends received C. Bonus issue of shares D. Surplus on revaluation of non-current assets E. Deficit on revaluation of non-current assets 9. In the statement of cash flows under which category is bank interest expense disclosed? A. Operating activities B. Investing activities C. Financing activities D. Working Capital charges E. None of the above 10. When preparing statement of cash flows, which of the following items cannot be classified as investing activities? A. Proceeds from the issue of shares, debentures and loan stock B. Dividends and interest received on investments C. Purchase of fixed assets D. Proceeds from sale of fixed assets and investments E. Purchase of investments 11. Which of the following is NOT information to be disclosed in financial statements? A. Statement of financial position www.starrygoldacademy.com Page 3
B. Statement of comprehensive income C. Statement of accounting policies D. Directors Report E. Notes on the financial statements 12. The means of communicating to interested parties, information on the resources, obligations and performance of the reporting economic entity or enterprise is A. Statement of comprehensive Income B. Statement of changes in financial position C. Statement of financial position D. Statement of cash flows E. Financial statements 13. The contents of published financial statements of a public limited liability company, according to IAS 1, include the following EXCEPT A. Statement of value added B. Statement of comprehensive income C. Statement of financial position D. Statement of changes in Equity E. Statement of cash flows 14 Which of the following headings is not a classification of cash flows in IAS 7? A Operating B Investing C Administration D Financing www.starrygoldacademy.com Page 4
15 A company has the following information about property, plant and equipment. 20X7 N'000 20X6 N'000 Cost 750 600 Accumulated depreciation 250 150 Net book value 500 450 Plant with a net book value of N75,000 (original cost N90,000) was sold for N30,000 during the year. What is the cash flow from investing activities for the year? A N95,000 inflow B N210,000 inflow C N210,000 outflow D N95,000 outflow 16 A company has the following extract from a statement of financial position. 20X7 N'000 20X6 N'000 Share capital 2,000 1,000 Share premium 500 Loan stock 750 1,000 What is the cash flow from financing activities for the year? A N1,250 inflow B N1,750 inflow C N1,750 outflow D N1,250 outflow 17 Which of the following items could appear in a company s statement of cash flows? (1) Surplus on revaluation of non-current assets (2) Proceeds of issue of shares (3) Proposed dividend (4) Dividends received www.starrygoldacademy.com Page 5
A 1 and 2 B 3 and 4 C 1 and 3 D 2 and 4 (2 marks) 18 Which of the following statements are correct? (1) A statement of cash flows prepared using the direct method produces a different figure for operating cash flow from that produced if the indirect method is used. (2) Rights issues of shares do not feature in statements of cash flows. (3) A surplus on revaluation of a non-current asset will not appear as an item in a statement of cash flows. (4) A profit on the sale of a non-current asset will appear as an item under Cash Flows from Investing Activities in a statement of cash flows. A 1 and 4 B 2 and 3 C 3 only D 2 and 4 19 What is the cash flow from operating activities? A Profit adjusted for non-cash items. B Cash from selling non-current assets C Cash from issuing long-term loans D Cash from the issue of share capital 20 A business had net cash flow from operating activities of N80,000, and these results: Operating profit 23,000 Depreciation 4,000 Loss on sale of non-current assets 22,000 Decrease in inventory 13,000 N www.starrygoldacademy.com Page 6
Increase in payables 10,000 What was the change in receivables? A No change B Decrease of N8,000 C Increase of N18,000 D Decrease of N5,000 www.starrygoldacademy.com Page 7
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