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Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Select the statement that is not true.
A) If a firm is operating profitably, it will automatically have plenty of cash.
B) The concept of cash underpinning the statement of cash flows is 'cash and cash equivalents.'
C) A bank overdraft is an example of a 'cash equivalent.'
D) Cash is the pre-eminent asset as it is the medium with which claims are normally settled.
Answer: A
Diff: 2
Skill: Analytical thinking
Objective: Explain why cash and cash flows are important to the reporting entity
2) The report prepared to summarise the entity's cash transactions for the period is the:
A) statement of comprehensive income.
B) statement of changes in equity.
C) statement of cash flows.
D) statement of financial position.
Answer: C
Diff: 1
Objective: Explain the nature, purpose and layout of the statement of cash flows
3) The purpose of the statement of cash flows is to provide information on:

A) profits.
B) net worth.
C) losses.
D) cash inflows and outflows.
Answer: D
Diff: 1
4) Which statement is correct?

A) The statement of comprehensive income and statement of financial position are accrual based and the statement of
cash flows is cash based.
B) The statement of comprehensive income, statement of financial position and statement of cash flows are all accrual
based.
C) The statement of financial position is accrual based and the income and statement of cash flows are cash based.
D) None of the statements is correct.
Answer: A
Diff: 2
5) In the statement of cash flows, the total of net cash flows from operating activities, net cash flows from investing
activities and net cash flows from financing activities for the period equals:
A) the cash balances at the beginning of the period.
B) the cash balances at the end of the period.
C) profit.
D) total net increase or decrease in cash held for the period.
Answer: D
Diff: 2
6) Operating activities are concerned with:

A) borrowing or lending.
B) the sale or disposal of non-current assets.
C) the trading and/or service operations of the business.
D) none of the above.
Answer: C
Diff: 1
7) All of the following are operating cash flows except:

A) income tax paid.
B) interest received.
C) payments to suppliers.
D) dividends paid to shareholders.
Answer: D
Diff: 1
8) Which item would not be included in the operating section of a statement of cash flows?
A) Cash interest received.
B) Cash received from the sale of surplus machinery.
C) Cash received from sales.
D) Cash payment of expenses.
Answer: B
Diff: 1
9) Cash inflows and outflows associated with changes in non-current liabilities and equity, not arising from profit, are
included in which section of the statement of cash flows?
A) Non-current.
B) Operating.
C) Financing.
D) Investing.
Answer: C
Diff: 1
10) Depreciation of plant and equipment will appear in which section of the statement of cash flows?
A) Does not appear in the statement.
B) Financing activities section.
C) Operating activities section.
D) Investing activities section.
Answer: A
Diff: 1
11) The item that is not classified as a cash flow from investing activities is:
A) payment for shares to be held as an investment.
B) cash purchase of office furniture.
C) receipt from the sale of premises.
D) dividends paid to investors.
Answer: D
Diff: 2
12) Cash received from the issue of shares will appear in which section of the statement of cash flows?
A) Investing activities section.
B) Does not appear in the statement.
C) Operating activities section.
D) Financing activities section.
Answer: D
Diff: 1
13) How would these items be classified in a statement of cash flows prepared for a hairdressing franchise?
i) Payment of $600 for hairdressing supplies.
ii) Takings from customers for the month.
iii) Capital paid into the business by the owner.
A) i. Operating outflow.
ii. Operating inflow.
iii. Does not appear in the statement of cash flows.
B) i. Investing outflow.
iii. Financing inflow.
C) i. Operating outflow.
iii. Financing inflow.
D) i. Operating outflow.
iii. Investing inflow.
Answer: C
Diff: 2
Skill: Application of knowledge
14) Baltimore Company had a long-term debt of $1,000,000. To extinguish this debt the company issued $1,000,000 of fully
paid shares to the lender. This transaction would have the following impact on the statement of cash flows:
A) increase cash flow from financing activities by $1,000,000.
B) decrease cash by $1,000,000.
C) increase cash by $1,000,000.
D) nil impact.
Answer: D
Diff: 3
15) Which transaction would not appear in the body of a statement of cash flows?
A) Acquisition of assets by means of a share issue.
B) Purchase of a building by incurring a mortgage to the seller.
C) Conversion of a liability to equity.
D) All of the above.
Answer: D
Diff: 3
16) The difference between operating profit or loss after tax and net cash provided by operating activities is due to:
A) changes in non-current liabilities.
B) changes in non-current assets.
C) changes in working capital items.
D) changes in equity items.
Answer: C
Diff: 2
17) In a growing business that keeps its asset base up-to-date, total cash flow from investing activities will normally be:
A) more than cash flow from operations.
B) negative.
C) positive.
Answer: B
Diff: 2
18) Which of these items will appear in a statement of cash flows?

A) Carrying value of an asset sold.
B) Adjustment in the balance of an asset account caused by a revaluation.
C) Proceeds from the sale of a fixed asset.
D) All of the above.
Answer: C
Diff: 1
19) State the effect on profit and cash of a firm paying a trade creditor.
A) Decrease in profit and decrease in cash.
B) No effect on profit and decrease in cash.
C) No effect on profit and no effect on cash.
D) Decrease in profit and no effect on cash.
Answer: B
Diff: 1
20) The effect on profit and cash of depreciating a non-current asset is:
A) decrease in profit and decrease in cash.
B) no effect on profit and decrease in cash.
C) no effect on profit and no effect on cash.
D) decrease in profit and no effect on cash.
Answer: D
Diff: 1
21) Which of these is a reason why a statement of cash flows could show a negative cash flow from operating activities
even though the statement of comprehensive income showed a profit?
A) An increase in the amount of inventory held.
B) A decrease in the amount owing by debtors.
C) An increase in the amount owing by creditors.
D) An increase in depreciation charged.
Answer: A
Diff: 3
22) A transaction that would not appear in a statement of cash flows is:
A) the creation of an allowance for doubtful debts.
B) the upward revaluation of an asset.
C) a bonus issue of shares.
D) all of the above.
Answer: D
Diff: 2
23) Which of the three main financial statements was chronologically the last to be required to be included as part of the
external financial reports?
A) Statement of comprehensive income.
B) Statement of financial position.
C) Statement of cash flows.
D) None, all three reports have always been required to be included in external financial reports.
Answer: C
Diff: 1
24) Company F received $20,000 in cash in repayment of a loan made to L Lee. In the statement of cash flows of Company
F, the $20,000 would appear as:
A) an investing outflow.
B) an investing inflow.
C) a financing outflow.
D) a financing inflow.
Answer: B
Diff: 2
25) An example of a non-cash investing or financing transaction is:

A) charging depreciation.
B) sale of a parcel of shares.
C) repayment of a loan.
D) the purchase of a building paid for by an issue of shares direct to the vendor.
Answer: D
Diff: 1
26) The cash transaction is:

A) declaration of a divided from a general reserve.
B) payment of a dividend to shareholders.
C) transfer from retained earnings to a general reserve.
Answer: B
Diff: 1
27) If 'other expenses' in the profit and loss report is $32,000 including $8,000 of depreciation, accrued 'other expenses' at
the beginning of the year is $1,000 and $0 at the end of the year, the figure for 'other expenses' that will appear in the
statement of cash flows for the year is:
A) $25,000.
B) $23,000.
C) $32,000.
D) $33,000.
Answer: A
Diff: 2
28) From the following information calculate the cash received from customers.
Accounts receivable opening balance $20,000

Credit Sales $840,000
Accounts receivable closing balance $40,000
A) $840,000.
B) $900,000.
C) $860,000.
D) $820,000.
Answer: D
Diff: 2
Objective: Prepare a simple statement of cash flows
29) If $80,000 is owed by customers at the beginning of the year, $75,000 is owed at the end and credit sales are $120,000,
the cash received from customers is:
A) $120,000.
B) $80,000.
C) $125,000.
D) $115,000.
Answer: C
Diff: 2
30) Calculate net cash flow from operating activities if:
Statement of financial performance (extract)

Sales (credit) $70,000
Less Expenses (cash) $48,000
Profit $22,000
Ledger account (extract)

Start of End of
Period Period
Accounts
Receivable $6,000 $9,000
A) $19,000.
B) $28,000.
C) $25,000.
D) $22,000.
Answer: A
Diff: 2
31) H Company's accounting records show:

$
Credit sales for the year 600,000
Discounts provided for early payment 15,000
Opening balance of accounts receivable 100,000
Closing balance of accounts receivable 90,000
The cash received from customers is:

A) $595,000.
B) $590,000.
C) $600,000.
D) $610,000.
Answer: A
Diff: 2
32) Under accrual accounting, the receipt of cash from a trade debtor will:
A) have no impact on profit and increase cash.
B) increase profit and increase cash.
C) decrease profit and decrease cash.
Answer: A
Diff: 2
33) $54,000 is owed to suppliers for inventory purchases at the beginning of the year and $44,000 is owed at the end of the
year. If annual credit purchases of inventory are $160,000, the cash paid to suppliers for the year is:
A) $170,000.
B) $150,000.
C) $160,000.
D) $214,000.
Answer: A
Diff: 2
34) All purchases of inventory are for cash. If inventory at the beginning of the year is $63,000 and at the end $88,000 and
the cost of sales is $200,000, the cash paid for inventory purchased for the year is:
A) $175,000.
B) $225,000.
C) $200,000.
Answer: B
Diff: 2
35) Indulgence Chocolates has provided the following information:
Cost of sales for the year $190,000

Opening balance of accounts payable $50,000
Closing balance of accounts payable $60,000
Opening balance of inventory $20,000
Closing balance of inventory $36,000
The cash payments made to suppliers during the year total:

A) $184,000.
B) $164,000.
C) $196,000.
D) $200,000.
Answer: C
Diff: 3
36) GG Pty Ltd's accounting records show:
Beginning Balance Ending Balance

'000 '000
$ $
Accounts payable 12 8
Inventory 25 21
Cost of sales - 50
Determine the amount of cash paid for inventory for the period.
A) $42,000.
B) $48,000.
C) $58,000.
D) $50,000.
Answer: D
Diff: 3
37) The tax payment appearing in the statement of cash flows of a company reflects:
A) a prepayment for next year's tax liability.
B) last year's tax liability (due to the lag in payment to tax office).
C) this year's tax liability.
D) an estimate of this year's tax liability.
Answer: B
Diff: 2
38) An extract from the trial balance of RRR Pty Ltd as at 30 June 2015 shows:
Income tax expense $20,000
If the income tax provided for at the end 2014 was $16,000 and taxation is paid in arrears in a lump sum, what amount
will appear in the statement of cash flows for taxation paid by RRR Pty Ltd for the year ended 30 June 2015?
A) $20,000.
B) $12,000.
C) $16,000.
D) Nil.
Answer: C
Diff: 1
39) Generally, the dividend payment appearing in the financing section of the statement of cash flows represents:
A) interim dividends declared in the current year.
B) proposed dividends from last year that have been paid, plus any interim dividends declared and paid in the current
year.
C) proposed dividends from last year.
D) current year's dividend.
Answer: B
Diff: 2
40) Wages expense in the income statement is $56,250 with the statement of financial position at the end of the year
showing accrued wages of $2,000. If there were no accrued wages at the beginning of the period, how much was paid out
in cash for wages during the year?
A) $54,250.
B) $56,250.
C) $2,000.
D) $58,250.
Answer: A
Diff: 2
41) If prepaid interest at the beginning of the period was zero and at the end of the period was $4,000 and interest expense
appears in the statement of comprehensive income for the year as $17,300, how much was paid out in cash for interest
during the year?
A) $13,300.
B) $21,300.
C) $17,300.
D) $4,000.
Answer: B
Diff: 2
42) If the opening balance of rent accrued at the beginning of the year was $1,000, rent expense for the year was $20,000
and the closing balance of rent accrued at the end of the year was $1,200, the amount paid in cash for rent during the year
is:
A) $22,200.
B) $21,000.
C) $20,200.
D) $19,800.
Answer: D
Diff: 3
43) University Press showed wage and salary expenses of $250,000 on its 2015 statement of comprehensive income but
reported cash paid to employees of $215,000 on its statement of cash flows. If the beginning balance of accrued wages and
salaries payable was $18,000, the ending balance is:
A) $53,000.
B) $45,000.
C) $35,000.
D) $17,000.
Answer: A
Diff: 3
44) The rule for converting credit sales to cash received from debtors is:
A) income - accounts receivable at the beginning + accounts receivable at the end = cash received.
B) income + accounts receivable at the beginning - accounts receivable at the end = cash received.
C) income + or - accounts receivable at the beginning + or - accounts receivable at the end = cash received.
Answer: B
Diff: 1
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
45) Cameron's Screensavers Ltd
Statement of financial position as at 31 December 2015 (Extracts)
2014 2015
$ $
Shareholders' Equity
Share capital ($1 shares) 250,000 360,000
Revaluation reserve 20,000 60,000
General reserve 150,000 100,000
Retained profits 66,000 76,000
$486,000 $596,000
Additional information:
• There was a bonus issue of 1 bonus share for every 5 existing shares held.
• Land and buildings was revalued by $40,000.
• A profit of $17,000 was earned during the year.
• Dividends of $6,000 were paid during the year that had been provided for in the prior year and $7,000 was provided as
a final dividend at the end of the current year.
REQUIRED:
Show the financing section of the statement of cash flows for Cameron Screensavers for the year ended 31 December 2009.
Answer: Cameron's Screensavers Ltd
Statement of cash flows for year ended 31 December 2015 (Extract)
$ $
Cash flows from Financing Activities
Share issue 60,000
Dividends paid (6,000) $54,000
Diff: 2
46) The statement of cash flows must include a note reconciling:
A) profit and cash flow from operations.
B) the business bank balance with the bank statement balance.
C) accrual accounting and historical cost accounting.
D) opening equity with closing equity.
Answer: A
Diff: 2
Skill: Written and oral communication
Objective: Prepare a reconciliation of profit with cash flow from operating activities, and explain how useful this is in decision-making
47) Calculate the cash from operating activities using the following information:
Profit $142,000.
Depreciation $46,000.
Accounts receivable increased by $10,000.
Accrued expense increased by $12,000.
Inventory increased by $14,000.
A) $176,000.
B) $186,000.
C) $165,000.
D) $200,000.
Answer: A
Diff: 3
48) From the following information, calculate net cash flow from operating activities.
Sales $185,000
Less Salaries $40,000
Depreciation $13,000
Other expenses $10,000
Interest expense $5,000 $68,000
Profit $117,000
Statement of financial position extract

Start of End of
Period Period
$ $
Accounts payable 11,000 14,000
Interest expense owing - 1,000
A) $134,000.
B) $115,000.
C) $128,000.
D) $126,000.
Answer: A
Diff: 3
49) If credit sales for the year are $120,000 and the accounts receivable balance has increased by $10,500 over the year, how
much cash was received from accounts receivable during the year?
A) $130,500.
B) $109,500.
C) $120,000.
D) $10,500.
Answer: B
Diff: 1
50) Calculate cash from operating activities using the following information:
Profit $148,000.
Depreciation $40,000.
Inventory increased by $10,000.
A) $148,000.
B) $178,000.
C) $188,000.
D) $98,000.
Answer: B
Diff: 2
51) When reconciling profit with net cash flow from operating activities:
A) subtract increases in current assets and add increases in current liabilities.
B) add increases in current assets and subtract increases in current liabilities.
C) add increases in current assets and add increases in current liabilities.
Answer: A
Diff: 3
52) Which of these factors could cause operating profit to be more than cash flow from operations?
A) An increase in the balance of accounts receivable over the period.
B) An increase in the balance of inventory over the period.
C) An increase in the balance of accounts payable over the period.
D) Both A and B.
Answer: D
Diff: 3
53) Which of these correctly shows the effect of charging depreciation on equipment for the period?
A) Decrease in accumulated depreciation; decrease in the carrying value of equipment.
B) Increase in accumulated depreciation; increase in the carrying value of equipment.
C) Increase in accumulated depreciation; decrease in the carrying value of equipment.
D) None of the above.
Answer: C
Diff: 2
54) When preparing the note attached to the statement of cash flows reconciling operating profit with cash flow from
operations, which statement is not true?
A) An increase in current assets is deducted from profit.
B) A decrease current assets is added to profit.
C) An increase in current liabilities is deducted from profit.
D) All of the above are true.
Answer: C
Diff: 2
55) In the reconciliation attached to the statement of cash flows, operating cash flow is reconciled to:
A) operating profit after tax.
B) operating profit before tax.
C) operating profit before interest and tax.
D) gross profit.
Answer: A
Diff: 1
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
56) The following information is produced on an accrual basis and relates to Emily's Superior Photo Framers.
Statement of comprehensive income for the year ended 31 December 2015
Income $80,880
Less Photo framing supplies used 14,500
66,380
Less Other Expenses
Advertising $250
Salaries 18,250
Vehicle expenses 5,300
Office expenses 3,500
Rent of premises 20,000
Interest expenses 2,000
Depreciation of equipment 3,600 52,900
Profit $13,480
Statement of financial position as at 31 December 2015

2014 2015
Current Assets $ $
Cash at bank 20,500 4,030
Accounts receivable 1,500 1,650
Stock of photo framing supplies 5,500 3,500
27,500 9,180
Fixed Assets
Photo Framing Equipment 55,700 65,000
Less Accumulated Depreciation 11,200 44,500 14,800 50,200
$72,000 $59,380
Current Liabilities
Creditor owed for vehicle expenses - 1,900
Long Term Liabilities
Loan Finance Co, repayable by 2012 18,000 15,000
18,000 16,900
Equity
Capital - Emily 34,000 34,000
Current account Emily 20,000 8,480
54,000 42,480
$72,000 $59,380
Additional Information:
• Emily withdrew $25,000 through the year for her own use.
• No photo framing equipment was sold during the year.
REQUIRED:
a) Prepare a classified statement of cash flows for the year ended 31 December 2015 from the above information. Show all
workings.
b) Prepare a statement reconciling profit with cash flow from operating activities.
c) Comment on what the statement of cash flows reveals about the cash situation of Emily's Superior Photo Framers.
Answer: Workings
a)
Cash received from customers
Accounts receivable start 1,500
Add income earned 80,880
82,380
Less Accounts receivable end 1,650
Cash received $80,730
Photo framing supplies purchased

Supplies used $14,500
Less stock of supplies at start 5,500
$9,000
Add stock of supplies at end 3,500
$12,500
Payments for other expenses

Total other expenses $52,900
Less accounts payable owing for vehicle exp. 1,900
Less depreciation equipment 3,600
$47,400
Emily's Superior Photo Framers

Statement of cash flows for year ended 31 December 2015
$ $
Cash flows from Operating Activities
Receipts from customers 80,730
Payments for photo framing supplies (12,500)
Payments for other expenses (47,400) 20,830
Cash flows from Investing Activities
Purchases of photo framing equipment (9,300)
Repayment Loan Finance Co. (3,000)
Drawings (25,000) (28,000)
Net decrease in cash held $(16,470)
Cash at beginning of year 20,500
Cash at end of year $4,030
b) Reconciliation of profit with cash provided by operating activities
Profit $13,480
Add back non-cash depreciation 3,600 +
Less increase in accounts receivable 150 -
Add decrease in photographic supplies 2,000 +
Add increase in accounts payable 1,900 +
Cash provided by operating activities $20,830
c)
Decrease in bank balance
Over the year, the cash position has decreased by $16,470. This has left cash reserves depleted and now only $4,030
remains in the bank.
Cash flow from operating activities is more than profit

The cash flow from operating activities is $7,350 more than profit. The main reasons are the $2,000 reduction in the stock
of photo framing supplies and the build up of $1,900 in vehicle expense accounts payable. Both of these are one-off factors
but don't represent desirable occurrences.
High level of equipment purchase in relation to size of profit

Investing and financing activities show that $9,300 of additional equipment was purchased during the year and that
$3,000 has been repaid from the loan taken out. The expenditure on equipment in relation to the level of profit is high,
though presumably the investment is intended to increase future profits.
Excessive drawings
When the equipment and the loan payments are deducted from the operating cash inflow, there is a surplus of $8,530, but
drawings are $25,000 with the balance of $16,500 being financed by the reduction in the bank balance. It is obvious that
this amount of drawings is excessive and must be reduced, as it is bleeding the business dry of cash
Potential difficulty in repaying the loan

There is still $15,000 of the loan to be repaid fully in three years, which is going to be difficult to achieve. Necessary steps
will be to cut back on purchases of new equipment and to slash drawings. Ways also need to be found to improve
operating cash flows. The new equipment should help in this regard.
Diff: 3
57) Xi Co provides you with the following information about its equipment account:
Opening balance of equipment $300,000

Closing balance of equipment $550,000
If machinery that originally cost $100,000 was sold during the year, what was the value of new equipment purchased?
A) $250,000.
B) $350,000.
C) $550,000.
D) $150,000.
Answer: B
Diff: 1
Objective: Identify some of the potential complexities that arise with statements of cash flows
58) Royal Plastics provides the following information about its moulding machinery:
Opening balance of machinery account $500,000

Closing balance of machinery account $650,000
Depreciation expense for the year $50,000
Depreciation charged on machinery sold $130,000
Profit on sale of machinery $20,000
Carrying value of machinery sold $90,000
How much cash was received from the disposal of machinery?

A) $100,000.
B) $20,000.
C) $110,000.
D) $90,000.
Answer: C
Diff: 3
59) Royal Plastics provides the following information about its moulding machinery:
Opening balance of machinery account $500,000

Closing balance of machinery account $650,000
Depreciation expense for the year $50,000
Depreciation charged on machinery sold $130,000
Profit on sale of machinery $20,000
Carrying value of machinery $90,000
What is the total cost of machinery purchased during the year?
A) $370,000.
B) $200,000.
C) $280,000.
D) $300,000.
Answer: A
Diff: 3
60) A motor vehicle was purchased for $25,000, depreciated using the reducing-balance method for 3 years at 20% p.a.
and was then sold for a price that was $1,600 more than the carrying amount of the vehicle. The cash received on the sale
of the motor vehicle was:
A) $12,800.
B) $14,400.
C) $11,200.
D) $11,600.
Answer: B
Diff: 3
61) If the balance of the share capital account is $300,000 at the beginning of the year and $410,000 at the end of the year,
and there has been a 1 for 6 bonus issue of shares at the start of the year, the amount that will appear in the statement of
cash flows for proceeds from the issue of shares is:
A) $360,000.
B) $300,000.
C) $410,000.
D) $60,000.
Answer: D
Diff: 2
62) If the opening balance of equity is $45,000, the closing balance is $60,000 and profit is $27,000, calculate the amount of
dividends paid (assume all dividends declared have been paid) which will appear as a financing outflow in the statement
of cash flows.
A) $15,000.
B) $42,000.
C) $12,000.
D) Nil.
Answer: C
Diff: 2
63) For The Book Co share capital increased by $200,000 in total over a year in which there was a bonus issue of 20,000
new shares at $2 per share. The cash flow from the issue of shares is:
A) $160,000.
B) $200,000.
C) $180,000.
D) $240,000.
Answer: A
Diff: 2
64) Motor vehicles are shown in the statement of financial position of Yong Ltd as:
2014 2015
Motor Vehicles at Cost $83,000 $95,000
Less Accumulated Depreciation $10,000 $15,000
Carrying Value $73,000 $80,000
Assuming that no vehicles were sold, the value of vehicles purchased during 2015 was:
A) $7,000.
B) $12,000.
C) $5,000.
D) $17,000.
Answer: B
Diff: 1
65) In 2015, G Co repaid $45,000 to the bank on a mortgage loan. $35,000 was interest on the mortgage and $10,000 was
repayment of the principal. The repayment would appear in the statement of cash flows as:
A) operating outflow $45,000.
B) operating outflow $35,000; investing outflow $10,000.
C) financing inflow $45,000.
D) operating outflow $35,000; financing outflow $10,000.
Answer: D
Diff: 1
66) In a healthy business, cash flow from operations will normally be:
A) negative.
B) less than the profit.
C) positive.
Answer: C
Diff: 2
Objective: Explain what the statement tells us, and illustrate how the statement of cash flows can be useful for identifying cash flow
management strengths, weaknesses and opportunities, both historically and in forecasting and planning
67) The statement of cash flows allows management to assess:

A) efficiency in earning profit.
B) efficiency in controlling expenses.
C) efficiency in managing cash flows.
D) efficiency in managing industrial relations.
Answer: C
Diff: 2
68) Warning signs of problems in managing cash flows are:
A) proceeds of borrowing that are continually greater than repayments of borrowings.
B) dividends paid to shareholders that are greater than profit.
C) cash flow from operating activities that is significantly lower than profit.
Answer: D
Diff: 3
1) A
2) C
3) D
4) A
5) D
6) C
7) D
8) B
9) C
10) A
11) D
12) D
13) C
14) D
15) D
16) C
17) B
18) C
19) B
20) D
21) A
22) D
23) C
24) B
25) D
26) B
27) A
28) D
29) C
30) A
31) A
32) A
33) A
34) B
35) C
36) D
37) B
38) C
39) B
40) A
41) B
42) D
43) A
44) B
45) Cameron's Screensavers Ltd
Statement of cash flows for year ended 31 December 2015 (Extract)
$ $
Share issue 60,000
Dividends paid (6,000) $54,000
46) A
47) A
48) A
49) B
50) B
51) A
52) D
53) C
54) C
55) A
56) Workings
a)
Cash received from customers
Accounts receivable start 1,500
Add income earned 80,880
82,380
Less Accounts receivable end 1,650
Cash received $80,730
Photo framing supplies purchased

Supplies used $14,500
Less stock of supplies at start 5,500
$9,000
Add stock of supplies at end 3,500
$12,500
Payments for other expenses

Total other expenses $52,900
Less accounts payable owing for vehicle exp. 1,900
Less depreciation equipment 3,600
$47,400
Emily's Superior Photo Framers

Statement of cash flows for year ended 31 December 2015
$ $
Cash flows from Operating Activities
Receipts from customers 80,730
Payments for photo framing supplies (12,500)
Payments for other expenses (47,400) 20,830
Cash flows from Investing Activities
Purchases of photo framing equipment (9,300)
Repayment Loan Finance Co. (3,000)
Drawings (25,000) (28,000)
Net decrease in cash held $(16,470)
Cash at beginning of year 20,500
Cash at end of year $4,030
b) Reconciliation of profit with cash provided by operating activities
Profit $13,480
Add back non-cash depreciation 3,600 +
Less increase in accounts receivable 150 -
Add decrease in photographic supplies 2,000 +
Add increase in accounts payable 1,900 +
Cash provided by operating activities $20,830
c)
Decrease in bank balance
Over the year, the cash position has decreased by $16,470. This has left cash reserves depleted and now only $4,030
remains in the bank.
Cash flow from operating activities is more than profit

The cash flow from operating activities is $7,350 more than profit. The main reasons are the $2,000 reduction in the stock
of photo framing supplies and the build up of $1,900 in vehicle expense accounts payable. Both of these are one-off factors
but don't represent desirable occurrences.
High level of equipment purchase in relation to size of profit

Investing and financing activities show that $9,300 of additional equipment was purchased during the year and that
$3,000 has been repaid from the loan taken out. The expenditure on equipment in relation to the level of profit is high,
though presumably the investment is intended to increase future profits.
Excessive drawings
When the equipment and the loan payments are deducted from the operating cash inflow, there is a surplus of $8,530, but
drawings are $25,000 with the balance of $16,500 being financed by the reduction in the bank balance. It is obvious that
this amount of drawings is excessive and must be reduced, as it is bleeding the business dry of cash
Potential difficulty in repaying the loan

There is still $15,000 of the loan to be repaid fully in three years, which is going to be difficult to achieve. Necessary steps
will be to cut back on purchases of new equipment and to slash drawings. Ways also need to be found to improve
operating cash flows. The new equipment should help in this regard.
57) B
58) C
59) A
60) B
61) D
62) C
63) A
64) B
65) D
66) C
67) C
68) D
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The Mechanics of Reason
Aristotle fathered the syllogism, or at least was first to investigate it
rigorously. He defined it as a formal argument in which the
conclusion follows logically from the premises. There are four
common statements of this type:
All S (for subject) is P (for
predicate)
No S (for subject) is P
Some S (for is P
subject)
Some S (for is not P
subject)
Thus, Aristotle might say “All men are mortal” or “No men are
immortal” as his subject. Adding an M (middle term), “Aristotle is a
man,” as a minor premise, he could logically go on and conclude
“Aristotle, being a man, is thus mortal.” Of course the syllogism
unwisely used, as it often is, can lead to some ridiculously silly
answers. “All tables have four legs. Two men have four legs. Thus,
two men equal a table.”
Despite the weaknesses of the syllogism, nevertheless it led
eventually to the science of symbolic logic. The pathway was
circuitous, even devious at times, but slowly the idea of putting
thought down as letters or numbers to be logically manipulated to
reach proper conclusions gained force and credence. While the
Greeks did not have the final say, they did have words for the subject
as they did for nearly everything else.
Let us leave the subject of pure logic for a moment and talk of
another kind of computing machine, that of the mechanical doer of
work. In the Iliad, Homer has Hephaestus, the god of natural fire and
metalworking, construct twenty three-wheeled chariots which propel
themselves to and fro bringing back messages and instructions from
the councils of the gods. These early automatons boasted pure gold
wheels, and handles of “curious cunning.”
Man has apparently been a lazy cuss from the start and began
straightway to dream of mechanical servants to do his chores. In an
age of magic and fear of the supernatural his dreams were fraught
with such machines that turned into evil monsters. The Hebrew
“golem” was made in the shape of man, but without a soul, and often
got out of hand. Literature has perpetuated the idea of machines
running amok, as the broom in “The Sorcerer’s Apprentice,” but
there have been benevolent machines too. Tik-Tok, a latter-day
windup man in The Road to Oz, could think and talk and do many
other things men could do. He was not alive, of course, but he had
the saving grace of always doing just what he “was wound up to do.”
Having touched on the subject of mechanical men, let us now
return to mechanical logic. Since the Greeks, many men have
traveled the road of reason, but some stand out more brightly, more
colorfully, than others. Such a standout was the Spanish monk
Ramón Lull. Lull was born in 1232. A court page, he rose in
influence, married young, and had two children, but did not settle
down to married domesticity. A wildly reckless romantic, he was
given to such stunts as galloping his horse into church in pursuit of
some lady who caught his eye. One such escapade led to a
remorseful re-examination of himself, and dramatic conversion to
Christianity.
He began to write books in conventional praise of Christ, but early
in his writings a preoccupation with numbers appears. His Book of
Contemplation, for example, actually contains five books for the five
wounds of the Saviour, and forty subdivisions for the days He spent
in the wilderness. There are 365 chapters for daily reading, plus one
for reading only in leap years! Each chapter has ten paragraphs,
symbolizing the ten commandments, and three parts to each
chapter. These multiplied give thirty, for the pieces of silver. Beside
religious and mystical connotations, geometric terms are also used,
and one interesting device is the symbolizing of words and even
phrases by letters. This ties in neatly with syllogism. A sample
follows:
… diversity is shown in the demonstration that the D makes of the E and the F
and the G with the I and the K, therefore the H has certain scientific knowledge of
Thy holy and glorious Trinity.
This was only prologue to the Ars Magna, the “Great Art” of
Ramón Lull. In 1274, the devout pilgrim climbed Mount Palma in
search of divine help in his writings. The result was the first recorded
attempt to use diagrams to discover and to prove non-mathematical
truths. Specifically, Lull determined that he could construct
mechanical devices that would perform logic to prove the validity of
God’s word. Where force, in the shape of the Crusades, had failed,
Lull was convinced that logical argument would win over the infidels,
and he devoted his life to the task.
Renouncing his estate, including his wife and children, Lull
devoted himself thenceforth solely to his Great Art. As a result of
dreams he had on Mount Palma, the basis for this work was the
assumption of simple premises or principles that are unquestionable.
Lull arranged these premises on rotating concentric circles. The first
of these wheels of logic was called A, standing for God. Arranged
about the circumference of the wheel were sixteen other letters
symbolizing attributes of God. The outer wheel also contained these
letters. Rotating them produced 240 two-term combinations telling
many things about God and His good. Other wheels prepared
sermons, advised physicians and scientists, and even tackled such
stumpers as “Where does the flame go when the candle is put out?”
From the Enciclopedia universal
illustrada,
Barcelona, 1923
Lull’s wheel.
Unfortunately for Lull, even divine help did not guarantee him
success. He was stoned to death by infidels in Bugia, Africa, at the
age of eighty-three. All his wheelspinning logic was to no avail in
advancing the cause of Christianity there, and most mathematicians
since have scoffed at his naïve devices as having no real merit. Far
from accepting the Ars Magna, most scholars have been “Lulled into
a secure sense of falsity,” finding it as specious as indiscriminate
syllogism.
Yet Lull did leave his mark, and many copies of his wheels have
been made and found useful. Where various permutations of
numbers or other symbols are required, such a mechanical tool is
often the fastest way of pairing them up. Even in the field of writing, a
Lullian device was popular a few decades ago in the form of the “Plot
Genii.” With this gadget the would-be author merely spun the wheels
to match up various characters with interesting situations to arrive at
story ideas. Other versions use cards to do the same job, and one
called Plotto was used by its inventor William Wallace Cook to plot
countless stories. Although these were perhaps not ideas for great
literature, eager writers paid as much as $75 for the plot boiler.
Not all serious thinkers relegated Lull to the position of fanatic
dreamer and gadgeteer. No less a mind that Gottfried Wilhelm von
Leibnitz found much to laud in Lull’s works. The Ars Magna might
well lead to a universal “algebra” of all knowledge, thought Leibnitz.
“If controversies were to arise,” he then mused, “there would be no
more reason for philosophers to dispute than there would for
accountants!”
Leibnitz applied Lull’s work to formal logic, constructed tables of
syllogisms from which he eliminated the false, and carried the work
of the “gifted crank” at bit nearer to true symbolic logic. Leibnitz also
extended the circle idea to that of overlapping them in early attempts
at logical manipulation that foreshadowed the work that John Venn
would do later. Leibnitz also saw in numbers a powerful argument for
the existence of God. God, he saw as the numeral 1, and 0 was the
nothingness from which He created the world. There are those,
including Voltaire whose Candide satirized the notion, who question
that it is the best of all possible worlds, but none can question that in
the seventeenth century Leibnitz foresaw the coming power of the
binary system. He also built arithmetical computers that could add
and subtract, multiply and divide.
A few years earlier than Leibnitz, Blaise Pascal was also
interested in computing machines. As a teen-ager working in his
father’s tax office, Pascal wearied of adding the tedious figures so he
built himself a gear-driven computer that would add eight columns of
numbers. A tall figure in the scientific world, Pascal had fathered
projective geometry at age sixteen and later established
hydrodynamics as a science. To assist a gambler friend, he also
developed the theory of probability which led to statistical science.
Another mathematical innovation of the century was that of placing
logarithms on a stick by the Scot, John Napier. What he had done, of
course, was to make an analog, or scale model of the arithmetical
numbers. “Napier’s bones” quickly became what we now call slide
rules, forerunners of a whole class of analog computers that solve
problems by being actual models of size or quantity. Newton joined
Leibnitz in contributing another valuable tool that would be used in
the computer, that of the calculus.
The Computer in Literature
Even as Plato had viewed with suspicion the infringement of
mechanical devices on man’s domain of higher thought, other men
have continued to eye the growth of “mechanisms” with mounting
alarm. The scientist and inventor battled not merely technical
difficulties, but the scornful satire and righteous condemnation of
some of their fellow men. Jonathan Swift, the Irish satirist who took a
swipe at many things that did not set well with his views, lambasted
the computing machine as a substitute for the brain. In Chapter V,
Book Three, of Gulliver’s Travels, the good dean runs up against a
scheming scientist in Laputa:
The first Professor I saw was in a very large Room, with Forty
Pupils about him. After Salutation, observing me to look earnestly
upon a Frame, which took up the greatest part of both the Length
and Breadth of the Room; he said, perhaps I might wonder to see
him employed in a Project for improving speculative knowledge by
practical and mechanical Operations. But the World would soon be
sensible of its Usefulness; and he flattered himself, that a more
noble exalted Thought never sprang in any other Man’s Head. Every
one knew how laborious the usual Method is of attaining to Arts and
Sciences; whereas by his Contrivance, the most ignorant Person at
a reasonable Charge, and with a little bodily Labour, may write
Books in Philosophy, Poetry, Politicks, Law, Mathematicks, and
Theology, without the least Assistance from Genius or Study. He
then led me to the Frame, about the Sides whereof all his Pupils
stood in Ranks. It was a Twenty Foot Square, placed in the Middle of
the Room. The Superfices was composed of several Bits of Wood,
about the Bigness of a Dye, but some larger than others. They were
all linked together by slender Wires. These Bits of Wood were
covered on every Square with Papers pasted on them; and on these
Papers were written all the Words of their Language in their several
Moods, Tenses, and Declensions, but without any Order. The
Professor then desired me to observe, for he was going to set his
Engine to work. The Pupils at his Command took each the hold of an
Iron Handle, whereof there were Forty fixed round the Edges of the
Frame; and giving them a sudden Turn, the whole Disposition of the
Words was entirely changed. He then commanded Six and Thirty of
the Lads to read the several Lines softly as they appeared upon the
Frame; and where they found three or four Words together that
might make Part of a Sentence, they dictated to the four remaining
Boys who were Scribes. This work was repeated three or four Times,
and at every Turn the Engine was so contrived, that the Words
shifted into new Places, as the square Bits of Wood moved upside
down.
Six hours a-day the young Students were employed in this Labour;
and the Professor showed me several Volumes in large Folio already
collected, of broken Sentences, which he intended to piece together,
and out of those rich Materials to give the World a compleat Body of
Art and Sciences; which however might be still improved, and much
expedited, if the Publick would raise a Fund for making and
employing five Hundred such Frames in Lagado....
Fortunately for Swift, who would have been horrified by it, he
never heard Russell Maloney’s classic story, “Inflexible Logic,” about
six monkeys pounding away at typewriters and re-creating the world
great literature. Gulliver’s Travels is not listed in their
accomplishments.
The French Revolution prompted no less an orator than Edmund
Burke to deliver in 1790 an address titled “Reflections on the French
Revolution,” in which he extols the virtues of the dying feudal order in
Europe. It galled Burke that “The Age of Chivalry is gone. That of
sophists, economists, and calculators has succeeded, and the glory
of Europe is extinguished forever.”
Seventy years later another eminent Englishman named Darwin
published a book called On the Origin of Species that in the eyes of
many readers did little to glorify man himself. Samuel Butler, better
known for his novel, The Way of All Flesh, wrote too of the
mechanical being, and was one of the first to point out just what sort
of future Darwin was suggesting. In the satirical Erewhon, he
described the machines of this mysterious land in some of the most
prophetic writing that has been done on the subject. It was almost a
hundred years ago that Butler wrote the first version, called “Darwin
Among the Machines,” but the words ring like those of a 1962 worrier
over the electronic brain. Butler’s character warns:
There is no security against the ultimate development of mechanical
consciousness in the fact of machines possessing little consciousness now.
Reflect upon the extraordinary advance which machines have made during the last
few hundred years, and note how slowly the animal and vegetable kingdoms are
advancing. The more highly organized machines are creatures not so much of
yesterday, as of the last five minutes, so to speak, in comparison with past time.
Do not let me be misunderstood as living in fear of any actually existing
machine; there is probably no known machine which is more than a prototype of
future mechanical life. The present machines are to the future as the early
Saurians to man ... what I fear is the extraordinary rapidity with which they are
becoming something very different to what they are at present.
Butler envisioned the day when the present rude cries with which
machines call out to one another will have been developed to a
speech as intricate as our own. After all, “... take man’s vaunted
power of calculation. Have we not engines which can do all manner
of sums more quickly and correctly than we can? What prizeman in
Hypothetics at any of our Colleges of Unreason can compare with
some of these machines in their own line?”
Noting another difference in man and his creation, Butler says,
... Our sum-engines never drop a figure, nor our looms a stitch; the machine is
brisk and active, when the man is weary, it is clear-headed and collected, when the
man is stupid and dull, it needs no slumber.... May not man himself become a sort
of parasite upon the machines? An affectionate machine-tickling aphid?
It can be answered that even though machines should hear never so well and
speak never so wisely, they will still always do the one or the other for our
advantage, not their own; that man will be the ruling spirit and the machine the
servant.... This is all very well. But the servant glides by imperceptible approaches
into the master, and we have come to such a pass that, even now, man must
suffer terribly on ceasing to benefit the machines. If all machines were to be
annihilated ... man should be left as it were naked upon a desert island, we should
become extinct in six weeks.
Is it not plain that the machines are gaining ground upon us, when we reflect on
the increasing number of those who are bound down to them as slaves, and of
those who devote their whole souls to the advancement of the mechanical
kingdom?
Butler considers the argument that machines at least cannot

copulate, since they have no reproductive system. “If this be taken to
mean that they cannot marry, and that we are never likely to see a
fertile union between two vapor-engines with the young ones playing
about the door of the shed, however greatly we might desire to do
so, I will readily grant it. [But] surely if a machine is able to reproduce
another machine systematically, we may say that it has a
reproductive system.”
Butler repeats his main theme. “... his [man’s] organization never
advanced with anything like the rapidity with which that of the
machine is advancing. This is the most alarming feature of the case,
and I must be pardoned for insisting on it so frequently.”
Then there is a startlingly clear vision of the machines “regarded
as a part of man’s own physical nature, being really nothing but
extra-corporeal limbs. Man ... as a machinate mammal.” This was
feared as leading to eventual weakness of man until we finally found
“man himself being nothing but soul and mechanism, an intelligent
but passionless principle of mechanical action.” And so the
Erewhonians in self-defense destroyed all inventions discovered in
the preceding 271 years!
Early Mechanical Devices
During the nineteenth century, weaving was one of the most
competitive industries in Europe, and new inventions were often
closely guarded secrets. Just such an idea was that of Frenchman
Joseph M. Jacquard, an idea that automated the loom and would
later become the basis for the first modern computers. A big problem
in weaving was how to control a multiplicity of flying needles to
create the desired pattern in the material. There were ways of doing
this, of course, but all of them were unwieldy and costly. Then
Jacquard hit on a clever scheme. If he took a card and punched
holes in it where he wanted the needles to be actuated, it was simple
to make the needles do his bidding. To change the pattern took only
another card, and cards were cheap. Patented in 1801, there were
soon thousands of Jacquard looms in operation, doing beautiful and
accurate designs at a reasonable price.
To show off the scope of his wonderful punched cards, Jacquard
had one of his looms weave a portrait of him in silk. The job took
20,000 cards, but it was a beautiful and effective testimonial. And
fatefully a copy of the silk portrait would later find its way into the
hands of a man who would do much more with the oddly punched
cards.
At about this same time, a Hungarian named Wolfgang von
Kempelen decided that machines could play games as well as work
in factories. So von Kempelen built himself a chess-playing machine
called the Maelzel Chess Automaton with which he toured Europe.
The inventor and his machine played a great game, but they didn’t
play fair. Hidden in the innards of the Maelzel Automaton was a
second human player, but this disillusioning truth was not known for
some time. Thus von Kempelen doubtless spurred other inventors to
the task, and in a short while machines would actually begin to play
the royal game. For instance, a Spaniard named L. Torres y
Quevedo built a chess-playing machine in 1914. This device played
a fair “end game” using several pieces, and its inventor predicted
future work in this direction using more advanced machines.
Charles Babbage was an English scientist with a burning desire
for accuracy. When some mathematical tables prepared for the
Astronomical Society proved to be full of errors, he angrily
determined to build a machine that would do the job with no
mistakes. Of course calculating machines had been built before; but
the machine Babbage had in mind was different. In fact, he called it
a “difference engine” because it was based on the difference tables
of the squares of numbers. The first of the “giant computers,” it was
to have hundreds of gears and shafts, ratchets and counters. Any
arithmetic problem could be set into it, and when the proper cranks
were turned, out would come an answer—the right answer because
the machine could not make a mistake. After doing some preliminary
work on his difference engine, Babbage interested the government in
his project since even though he was fairly well-to-do he realized it
would cost more money than he could afford to sink into the project.
Babbage was a respected scientist, Lucasian Professor of
Mathematics at Cambridge, and because of his reputation and the
promise of the machine, the Chancellor of the Exchequer promised
to underwrite the project.
For four years Babbage and his mechanics toiled. Instead of
completing his original idea, the scientist had succeeded only in
designing a far more complicated machine, one which would when
finished weigh about two tons. Because the parts he needed were
advanced beyond the state of the art of metalworking, Babbage was
forced to design and build them himself. In the process he decided
that industry was being run all wrong, and took time out to write a
book. It was an excellent book, a sort of forerunner to the modern
science of operations research, and Babbage’s machine shop was
doing wonders for the metalworking art.
Undaunted by the lack of progress toward a concrete result,
Babbage was thinking bigger and bigger. He was going to scrap the
difference engine, or rather put it in a museum, and build a far better
computer—an “analytical engine.” If Jacquard’s punched cards could
control the needles on a loom, they could also operate the gears and
other parts of a calculating machine. This new engine would be one
that could not only add, subtract, multiply, and divide; it would be
designed to control itself. And as the answers started to come out,
they would be fed back to do more complex problems with no further
work on the operator’s part. “Having the machine eat its own tail!”
Babbage called this sophisticated bit of programming. This
mechanical cannibalism was the root of the “feedback” principle
widely used in machines today. Echoing Watt’s steam governor, it
prophesied the coming control of machines by the machines
themselves. Besides this innovation, the machine would have a
“store,” or memory, of one thousand fifty-digit numbers that it could
draw on, and it would actually exercise judgment in selection of the
proper numbers. And as if that weren’t enough, it would print out the
correct answers automatically on specially engraved copper plates!
Space Technology Laboratories
“As soon as an Analytical Engine exists, it will

necessarily guide the future course of science.
Whenever any result is sought by its aid, the question
will then arise—by what course of calculation can
these results be arrived at by the machine in the
shortest time?” Charles Babbage—The Life of a
Philosopher, 1861.
It was a wonderful dream; a dream that might have become an

actuality in Babbage’s own time if machine technology had been as
advanced as his ideas. But for Babbage it remained only a dream, a
dream that never did work successfully. The government spent
£17,000, a huge sum for that day and time, and bowed out. Babbage
fumed and then put his own money into the machine. His mechanics
left him and became leaders in the machine-tool field, having trained
in Babbage’s workshops. In despair, he gave up on the analytical
engine and designed another difference engine. An early model of
this one would work to five accurate places, but Babbage had his
eyes on a much better goal—twenty-place accuracy. A lesser man
would have aimed more realistically and perhaps delivered workable
computers to the mathematicians and businessmen of the day.
There is a legend that his son did finish one of the simpler machines
and that it was used in actuarial accounting for many years. But
Babbage himself died in 1871 unaware of how much he had done for
the computer technology that would begin to flower a few short
decades later.
Singlehandedly he had given the computer art the idea of
programming and of sequential control, a memory in addition to the
arithmetic unit he called a “mill,” and even an automatic readout such
as is now standard on modern computers. Truly, the modern
computer was “Babbage’s dream come true.”
Symbolic Logic
Concurrently with the great strides being made with mechanical
computers that could handle mathematics, much work was also
being done with the formalizing of the logic. As hinted vaguely in the
syllogisms of the early philosophers, thinking did seem amenable to
being diagrammed, much like grammar. Augustus De Morgan
devised numerical logic systems, and George Boole set up the logic
system that has come to be known as Boolean algebra in which
reasoning becomes positive or negative terms that can be
manipulated algebraically to give valid answers.
John Venn put the idea of logic into pictures, and simple pictures
at that. His symbology looks for all the world like the three
interlocking rings of a well-known ale. These rings stand for the
subject, midterm, and predicate of the older Aristotelian syllogism.
By shading the various circles according to the major and minor
premises, the user of Venn circles can see the logical result by
inspection. Implicit in the scheme is the possibility of a mechanical or
electrical analogy to this visual method, and it was not long until
mathematicians began at least on the mechanical kind. Among these
early logic mechanizers, surprisingly, was Lewis Carroll who of
course was mathematician Charles L. Dodgson before he became a
writer.
Carroll, who was a far busier man than most of us ever guess,
marketed a “Game of Logic,” with a board and colored cardboard
counters that handled problems like the following:
All teetotalers like sugar.

No nightingale drinks wine.
By arranging the counters on Carroll’s game board so that: All M are

X, and No Y is not-M, we learn that No Y is not-X! This tells the
initiate logician that no nightingale dislikes sugar; a handy piece of
information for bird-fancier and sugar-broker alike.
Lewis Carroll’s “Symbolic Logic.”
Charles, the third Earl Stanhope, was only slightly less

controversial than his prime minister, William Pitt. Scientifically he
was far out too, writing books on electrical theory, inventing
steamboats, microscopes, and printing presses among an odd
variety of projects; he also became interested in mechanical logic
and designed the “Stanhope Demonstrator,” a contrivance like a
checkerboard with sliding panels. By properly manipulating the
demonstrator he could solve such problems as:
Eight of ten children are bright.

Four of these children are boys.
What are the minimum and maximum number of bright boys? A

simple sliding of scales on the Stanhope Demonstrator shows that
two must be boys and as many as four may be. This clever device
could also work out probability problems such as how many heads
and tails will come up in so many tosses of a coin.
In 1869 William S. Jevons, an English economist and expert
logician, built a logic machine. His was not the first, of course, but it
had a unique distinction in that it solved problems faster than the
human brain could! Using Boolean algebra principles, he built a
“logical abacus” and then even a “logical piano.” By simply pressing
the keys of this machine, the user could make the answer appear on
its face. It is of interest that Jevons thought his machine of no
practical use, since complex logical questions seldom arose in
everyday life! Life, it seems, was simpler in 1869 than it is today, and
we should be grateful that Jevons pursued his work through sheer
scientific interest.
More sophisticated than the Jevons piano, the logic machine
invented in America by Allan Marquand could handle four terms and
do problems like the following:
There are four schoolgirls, Anna, Bertha, Cora, and Dora.
When Anna or Bertha, or both, remain home, Cora is at home.
When Bertha is out, Anna is out.
Whenever Cora is at home, Anna is too.
What can we tell about Dora?
The machine is smart enough to tell us that when Dora is at home

the other three girls are all at home or out. The same thing is true
when Dora is out.
The Census Taker
Moving from the sophistication of such logic devices, we find a
tremendous advance in mechanical computers spurred by such a
mundane chore as the census. The 1880 United States census
required seven years for compiling; and that with only 50 million
heads to reckon. It was plain to see that shortly a ten-year census
would be impossible of completion unless something were done to
cut the birth rate or speed the counting. Dr. Herman Hollerith was the
man who did something about it, and as a result the 1890 census,
with 62 million people counted, took only one-third the time of the
previous tally.
Hollerith, a statistician living in Buffalo, New York, may or may not
have heard the old saw about statistics being able to support
anything—including the statisticians, but there was a challenge in the
rapid growth of population that appealed to the inventor in him and
he set to work. He came up with a card punched with coded holes, a
card much like that used by Jacquard on his looms, and by Babbage
on the dream computer that became a nightmare. But Hollerith did
not meet the fate of his predecessors. Not stoned, or doomed to die
a failure, Hollerith built his card machines and contracted with the
government to do the census work. “It was a good paying business,”
he said. It was indeed, and his early census cards would some day
be known generically as “IBM cards.”
While Jacquard and Babbage of necessity used mechanical
devices with their punched cards, Hollerith added the magic of
electricity to his card machine, building in essence the first electrical
computing machine. The punched cards were floated across a pool
of mercury, and telescoping pins in the reading head dropped
through the holes. As they contacted the mercury, an electrical circuit
was made and another American counted. Hollerith did not stop with
census work. Sagely he felt there must be commercial applications
for his machines and sold two of the leading railroads on a punched-
card accounting system. His firm merged with others to become the
Computing-Tabulating-Recording Company, and finally International
Business Machines. The term “Hollerith Coding” is still familiar today.

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3) The purpose of the statement of cash flows is to provide information on:

4) Which statement is correct?

6) Operating activities are concerned with:

7) All of the following are operating cash flows except:

18) Which of these items will appear in a statement of cash flows?

25) An example of a non-cash investing or financing transaction is:

26) The cash transaction is:

Accounts receivable opening balance $20,000

30) Calculate net cash flow from operating activities if:

Statement of financial performance (extract)

Ledger account (extract)

31) H Company's accounting records show:

The cash received from customers is:

35) Indulgence Chocolates has provided the following information:

Cost of sales for the year $190,000

The cash payments made to suppliers during the year total:

36) GG Pty Ltd's accounting records show:

Beginning Balance Ending Balance

Income tax expense $20,000

Statement of financial position extract

Statement of comprehensive income for the year ended 31 December 2015

Statement of financial position as at 31 December 2015

Photo framing supplies purchased

Payments for other expenses

Emily's Superior Photo Framers

b) Reconciliation of profit with cash provided by operating activities

Cash flow from operating activities is more than profit

High level of equipment purchase in relation to size of profit

Potential difficulty in repaying the loan

Opening balance of equipment $300,000

Opening balance of machinery account $500,000

How much cash was received from the disposal of machinery?

Opening balance of machinery account $500,000

67) The statement of cash flows allows management to assess:

Photo framing supplies purchased

Payments for other expenses

Emily's Superior Photo Framers

b) Reconciliation of profit with cash provided by operating activities

Cash flow from operating activities is more than profit

High level of equipment purchase in relation to size of profit

Potential difficulty in repaying the loan

Butler considers the argument that machines at least cannot

“As soon as an Analytical Engine exists, it will

It was a wonderful dream; a dream that might have become an

All teetotalers like sugar.

By arranging the counters on Carroll’s game board so that: All M are

Charles, the third Earl Stanhope, was only slightly less

Eight of ten children are bright.

What are the minimum and maximum number of bright boys? A

The machine is smart enough to tell us that when Dora is at home

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