Cash Flows Statements Practice Revision - Ias 7 Format: Exercise 1

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CASH FLOWS STATEMENTS PRACTICE REVISION –

IAS 7 FORMAT
Exercise 1:
Extract from the financial statements for Meera Plc for the year ended 31 March
20X2 are as follows:
Meera Plc
Statement of profit or loss
For the year ended March 31, 20X2
Profit from operations £819,640
Finance costs (89,600)
Profit before tax 730,040
Income tax (245,700)
Profit for year 484,340

Meera Plc
Comparative statements of financial position
March 31
20X2 20X1
£ £
Non-current assets
Property, plant and equipment 982,600 797,500
Intangible assets 580,040 386,900

Current assets
Inventories 430,040 285,550
Trade receivables 342,700 224,150
Government bonds 40,000 10,000
Cash 37,470 3,800

IAS 7 Page 1
Total assets 2,412,850 1,707,900

Equity share capital (£1 share) 312,400 232,800


Share premium 398,200 351,000
Retained earnings 534,800 282,100

Non-current liabilities
Borrowings 567,400 423,000
Preference shares 75,000 0

Current liabilities
Borrowings 115,600 51,000
Bank overdraft 51,200 27,230
Tax payable 201,800 192,520
Trade payable 146,700 135,900
Accrued interest 9,750 12,350
Total equity and liabilities 2,412,850 1,707,900

Additional information:
1. Included in profit from operations is a loss of £84,810 in respect of the
disposal of machinery in the year. This machinery had a carrying amount of
£127,800 at the disposal date.
2. The depreciation charge for the year was £232,900
3. Included in the trade payable at March 31, 20X2 is an amount of £13,900 in
respect of a purchase of an item of property, plant and equipment in the year
that has not yet been paid for.
4. Intangible assets costing £251,340 were purchased for cash during the year.
Intangible assets with a carrying amount of £17,000 were sold for £24,000

IAS 7 Page 2
during the year. The profit on disposal has been offset against operating
costs.
5. On April 1, 20X1 Meera Plc made a one for ten bonus issue from share
premium. A further share issue took place in December 20X1 for cash.
6. Meera Plc declared and paid a dividend during the year.
7. Redeemable preference shares in the amount of £75,000 were issued during
the year.
8. An impairment review at December 31, 20X7 identified a fall in the
recoverable amount of intangible assets. As a result, an impairment loss of
£20,000 was identified and charged to administrative expenses.
9. The government bonds are highly liquid and management has decided to
class them as cash equivalents.
Requirement: Prepare a statement of cash flows for the year ended December
31, 20X2 in according with IAS 7.

Exercise 2:
As at May 31, 20X1 and May 31, 20X2 Tempo Plc had the following
summarised statements of financial position.
20X2 20X1
£ £
ASSETS
Non-current assets
PPE
Cost 3,284,000 3,091,000
Accumulated depreciation (2,198,000) (2,001,000)
1,086,000 1,090,000
Intangibles assets
Cost 9,360,000 8,645,000

IAS 7 Page 3
Accumulated amortization (3,690,000) (2,715,000)
5,670,000 5,930,000
Investments 2,145,000 127,000
8,901,000 7,147,000
Current assets
Investments 60,000 40,000
Inventories 1,112,000 1,086,000
Trade receivables 948,000 840,000
Prepayments 95,000 108,000
Cash 479,000 282,000
2,694,000 2,356,000
Total assets 11,595,000 9,503,000

EQUITY AND LIABILITIES


Capital and reserves
Ordinary share capital 1,800,000 1,000,000
Share premium 1,543,000 1,421,000
Retained earnings 2,689,000 746,000
6,032,000 3,167,000
Non-current liabilities
15% debenture loan 3,000,000 4,500,000
Preference shares 100,000 0
3,100,000 4,500,000
Current liabilities
Trade payables 1,417,000 896,000
Accruals 225,000 337,000
Dividend payable 180,000 100,000
Taxation 641,000 503,000

IAS 7 Page 4
2,463,000 1,836,000
Total equity and liabilities 11,595,000 9,503,000

Tempo’s statement of profit or loss for the year ended May 31, 20X2 was as
follows:
£
Revenue 8,646,000
Cost of sales (3,705,000)
Gross profit 4,941,000
Distribution costs (465,000)
Administrative expenses (621,000)
Profit from operations 3,855,000
Finance costs (563,000)
Investment income 78,000
Profit before tax 3,370,000
Income tax expense (684,000)
Profit for the period 2,686,000

Additional information:
1. During the year plant and equipment with an original cost of £1,201,000 and
carrying amount at the date of disposal of £496,000 was sold at a loss of
£189,000. As at May 31, 20X2 £165,000 of the sale proceeds had yet to be
received and is included within trade receivables. As at May 31, 20X1 the
corresponding figure in respect of disposals made during the year then ended
was £79,000, which was received in full in June 20X1.
2. As in the previous year, all acquisitions of PPE made during the year were
paid for in cash at the date of acquisition. However, included within trade
payables at May 31, 20X2 is £376,000 (20X1 - £nil) relating to the
acquisition of intangible assets.

IAS 7 Page 5
3. There were no disposals of intangible assets or investments during the year.
Trade receivables at May 31, 20X2 include £10,000 (20X1 £8,000) in respect
of interest receivable on investments.
4. As at May 31, 20X1 the ordinary share capital of Tempo Plc consisted of 1
million shares, each with a £1 nominal value. The following day the
company made a 1 for 2 bonus issue of 500,000 shares (utilising available
profits).
5. Dividends payable at both statement of financial position dates represents a
10p per share dividend on the company’s ordinary share. Dividends of
£243,000 were charged to retained earnings in the year ended 31 May 20X2.
6. The current asset investments are government bonds and management has
decided to class them as cash equivalents.
7. During the year Tempo Plc issued 100,000 £1 redeemable preference shares.
8. Included within accruals at May 31, 20X1 is £125,000 (20X1 £75,000) for
interest payable.
9. An impairment review at 31 May 20X2 identified a fall in the recoverable
amount of the intangible assets. As a result, an impairment loss of £18,000
was identified and written off to administrative expenses.

Requirement: Prepare a statement of cash flows for the year ended May 31,
20X2 in accordance with IAS 7.

Exercise 3:
Arial Company
Comparative Statements of Financial Position
November 30
20X2 20X1
£ £

IAS 7 Page 6
ASSETS
Non-current assets
Property, plant and equipment 2,543,000 2,401,000
Intangible assets 550,000 584,000
Investments 406,000 -
3,499,000 2,985,000
Current assets
Inventories 685,000 598,000
Trade receivables 480,000 465,000
Prepayments 96,000 126,000
Cash and cash equivalents 426,000 200,000
1,687,000 1,389,000
Total assets 5,186,000 4,374,000

EQUITY AND LIABILITIES


Capital and reserves
Ordinary share capital 1,100,000 1,000,000
Share premium account 342,000 200,000
Retained earnings 1,785,000 1,311,000
3,227,000 2,511,000
Non-current liabilities
Borrowings 500,000 1,000,000
Redeemable preference shares 200,000 0
700,000 1,000,000
Current liabilities
Trade payables 749,000 427,000
Accruals 108,000 131,000
Taxation 282,000 165,000

IAS 7 Page 7
Provisions 120,000 140,000
1,259,000 863,000
Total equity and liabilities 5,186,000 4,374,000

Arial Company
Statement of profit or loss
For the year ended November 30, 20X2
£
Revenue 5,762,000
Cost of sales (4,630,000)
Gross profit 1,132,000
Distribution costs (236,000)
Administrative expenses (127,000)
Profit from operations 769,000
Finance charge (68,000)
Investment income 55,000
Profit before tax 756,000
Income tax expense (232,000)
Profit for the period 524,000

The following additional information is relevant:


1. Included within trade payables at November 30, 20X2 is £351,000 (20X1
£106,000) relating to purchases of PPE.
2. Included within accruals at November 30, 20X2 is £25,000 (20X1 £50,000)
for interest payable.
3. Property, plant and equipment and intangible assets can be analysed as
follows:
20X2 20X1

IAS 7 Page 8
£ £
Property, plant and equipment
Cost or valuation 7,464,000 6,375,000
Accumulated depreciation (4,921,000) (3,974,000)
2,543,000 2,401,000
Intangibles
Cost 883,000 938,000
Accumulated amortization (333,000) (354,000)
550,000 584,000
4. During the year, plant with an original cost of £479,000 and a carrying
amount at the date of disposal of £326,000 was sold for £424,000 which was
received in cash.
5. Arial Company received £20,000 during the year from the sale of highly
liquid investments, which were classed as cash equivalents.
6. During the year, Arial Company made a 1 for 20 bonus issue of its ordinary
shares. The subsequent issue of shares was made as a premium.
7. Included in trade receivables at the year ended was £25,000 in relation to
investment income. The corresponding figure for 20X1 was £15,000.
8. Intangible assets with accumulated amortisation at the date of disposal of
£40,000 were sold for £12,000. There were no acquisitions of intangible
assets during the year.
9. Redeemable preference shares in the amount of £200,000 were issued during
the year.
Requirement: Prepare a statement of cash flows for Arial Company for the year
ended November 30, 20X2 in accordance with IAS 7.

Exercise 4:
The following are the draft financial statements for Terrell Plc for the year ended
December 31, 20X7.

IAS 7 Page 9
Terrell Plc
Statement of profit or loss
For the year ended December 31, 20X7
£
Revenue 7,350,500
Cost of sales (4,560,600)
Gross profit 2,789,900
Administrative expenses (1,060,800)
Distribution costs (768,000)
Profit from operations 961,100
Finance charge (75,000)
Profit before tax 886,100
Income tax expense (350,000)
Profit for the period 536,100

Terrell Plc
Comparative Statements of Financial Position
December 31
20X7 20X6
£ £
ASSETS
Non-current assets
Property, plant and equipment 6,985,400 6,713,500
Intangible assets 350,700 300,500
7,336,100 7,014,000
Current assets
Inventories 60,500 365,100
Trade receivables 169,000 144,500

IAS 7 Page 10
Investments 25,000 12,400
Cash and cash equivalents 10,700 20,200
265,200 542,200
Total assets 7,601,300 7,556,200

EQUITY AND LIABILITIES


Capital and reserves
Ordinary share capital 4,000,000 3,500,000
Share premium account 1,200,000 950,000
Retained earnings 1,342,800 2,206,700
6,542,800 6,656,700
Non-current liabilities
Preference share capital (redeemable ) 500,000 400,000

Current liabilities
Trade payables 148,500 139,500
Taxation 410,000 360,000
558,500 449,500
Total equity and liabilities 7,601,300 7,556,200

Additional information:
1. During the year, Terrell Plc issued redeemable preference shares at par.
2. The current asset investments are government bonds and management has
decided to class them as cash equivalents.
3. During the year Terrell Plc sold plant and equipment with a carrying amount
of £560,500 for £600,000. Total depreciation charges for the year were
£750,600.
4. Trade payables include accrued interest of £5,000 ( 20X6 £7,000)

IAS 7 Page 11
5. Terrell Plc acquired new intangible assets at a cost of £77,500 during the
year.
6. Included in trade receivables is investment income of £14,500 (20X6 £2,000)
7. An impairment review at December 31, 20X7 identified a fall in the
recoverable amount of intangible assets. As a result, an impairment loss of
£15,000 was identified and written off to administrative expenses.
8. Included in trade payables is £10,000 which relates to the purchase of
machinery.
9. During the year Terrell Plc made a 1 for 100 bonus issue of its ordinary
shares.
Requirement: Prepare a statement of cash flows for the year ended December
31, 20X7 in accordance with IAS 7.

Exercise 5:
The following are the draft financial statement for Vernet Company for the year
ended March 31, 20X5.
Vernet Company
Statement of profit or loss
For the year ended March 31, 20X5
£
Revenue 5,650,500
Cost of sales (3,460,600)
Gross profit 2,189,900
Administrative expenses (978,800)
Distribution costs (256,000)
Profit from operations 955,100
Finance charge (89,000)
Profit before tax 866,100

IAS 7 Page 12
Income tax expense (297,600)
Profit for the period 568,500

Vernet Company
Comparative Statements of Financial Position
March 31
20X7 20X6
£ £
ASSETS
Non-current assets
Property, plant and equipment 4,360,400 2,950,300
Investments 172,000 156,000
4,532,400 3,106,300
Current assets
Inventories 460,600 365,100
Trade receivables 269,000 244,500
Government bonds 105,000 100,000
Cash 180,000 20,200
1,014,600 729,800
Total assets 5,547,000 3,836,100

EQUITY AND LIABILITIES


Capital and reserves
Ordinary share capital 3,000,000 1,800,000
Share premium account 1,050,000 850,000
Retained earnings 142,500 74,500
4,192,500 2,724,500
Non-current liabilities

IAS 7 Page 13
Loan 556,000 472,000
Preference shares (redeemable ) 150,000 0
706,000 472,000
Current liabilities
Trade payables 348,500 289,600
Taxation 300,000 350,000
648,500 639,600
Total equity and liabilities 5,547,000 3,836,100

Additional information:
1. During the year Vernet Company made a 1 for 10 bonus issue of its ordinary
shares. It subsequently issued further shares at the market price.
2. An impairment review at March 31, 20X5 identified a fall in the recoverable
amount of certain non current investments. As a result, an impairment loss of
£12,000 was identified and written off to administrative expenses.
3. During the year Vernet Company acquired plant and equipment for cash of
£2,057,000. In addition, plant and equipment with a fair value of £600,000
was acquired through a long term loan. The depreciation charge for the year,
charged to cost of sales, was £750,600. A loss on sale of plant of £55,000
was made during the year.
4. Interest payable of £10,000 has been included in trade payables at year end.
The corresponding figure in 20X4 was £5,000.
5. The government bonds are highly liquid and management has decided to
class them as cash equivalents.
6. Vernet Company issued £150,000 redeemable preference share during the
year.
7. Included in trade payables is £10,000 in relation to the acquisition of long
term investments.

IAS 7 Page 14
Requirement: Prepare a statement of cash flows for the year ended March 31,
20X5.

IAS 7 Page 15

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