Homework Question Solutions Topic 7 

Q1: Question 1 - Final Exam – Semester 2, 2007 – adapted

Q2: Question 1 (adapted) - Final Exam – Semester 1, 2009
Q3: Knight Ltd
Q4: Question 3 – Final Exam 2013s1 - Adapted
Q5: Additional Question 1
Q6: Additional Question 2
Q7: Question 1 – Mid-session Exam 2006s2 (modified)
 

   

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Q1: Final Exam – Semester 2, 2007 - Question 1 adapted (33 marks) 
 

Darby Ltd.
Cash Flow statement
For Year Ended 30 June 2006

$’000 $’000

Cash flows from operations

Receipts from customers 1,492
Receipts from dividends 5
Payments to suppliers (1,059)
Payments for insurance (9)
Payments for interest expense (25)
Payments for other operating expenses (80)
Payments for income tax (75)
Cash Flows from Operations 249
Cash Flows from Investing Activities
Proceeds from sale of land 42
Proceeds from sale of buildings 77
Cash paid for purchase of investments (45)
Cash paid for purchase of land (53)
Cash paid for purchase of buildings (50)

Cash Flows from Investing Activities (29)

Cash Flows from Financing Activities

Proceeds from mortgage 75
Proceeds from share issue 56
Repayment of short-term loan (11)
Redemption of bonds (150)
Cash paid for 2005 final dividends (12)
Cash paid for 2006 interim dividends (15)
Cash Flows from Financing Activities (57)

Net Cash Flows 163

Cash balance at the beginning 66

Cash balance at the end 229

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 WORKINGS:
Accounts Receivable  Allowance for Doubtful Debts 
DR  CR  DR  CR 
o/b      128  11  ADD  A/c Rec    11  12  o/b 
sales   1,520  1,492  CASH     15 
       145  c/b  c/b   16       
 1,648  1,648   27  27 
 
Accounts Payable  Inventory 
DR  CR  DR  CR 
  51  o/b  o/b  190  1,110  COGS 
 CASH  1,059  1,095  purchases  1,095 
  c/b    87              175  c/b      
1,146  1,146      1,285  1,285   
 
Other expenses less Depreciation: $198,000 ‐ $102,000 = $96,000 
 
Acc. Depreciation ‐ Buildings  Acc. Depreciation ‐ Equipment 
DR  CR  DR  CR 
43  81  o/b      149  o/b 
 c/b    75  37  Exp.   c/b   214  65  Exp. 
118  118      214  214   
 
Depreciation expense: 37 + $65 = $10;  
Other expenses cash only = 198 – 102 = 96  
Accrued Expenses                              Income Tax Payable 
DR  CR  DR  CR 
 CASH  80  11  o/b  CASH  75  23  o/b 
 c/b    27  96  Exp.   c/b  15  67  Exp. 
107  107      90  90   
 
Note: Insurance Expense in the Income statement is = cash paid for insurance ($9,000) as there are 
no prepaid insurance or insurance payable accounts in the balance sheet. 
 
Land  Buildings 
DR  CR  DR  CR 
o/b  149     o/b   225  89  Sale 
Revalue   30  60  Sale    
Purchase    53  172   c/b  Purchase  50   186  c/b  
232  232   275  275 
 
Cash         DR 42,000 
Loss on Disposal     DR 18,000 
Land        CR     60,000 
 
Cash         DR 77,000 
Acc. Depreciation    DR 43,000 
Gain on Sale of Buildings   CR                  31,000 
Buildings      CR     89,000 

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Revaluation Reserve  Investments 
DR  CR  DR  CR 
    17  o/b     o/b   169 
(Bonus 
Issue)  15  30  Land  Purchases  45 
 c/b   32      214  c/b  
47  47  214   214 
 
 
 
Mortgage debenture  Share Capital 
DR  CR  DR  CR 
    0  o/b        420  o/b 
    75  Cash      56  (Share issue) 
 c/b  75     c/b  491  15  (Bonus issue) 
75  75  491  491 
 
 
Short term Loan  Bonds Payable 
DR  CR  DR  CR 
  20  o/b  259   o/b 
 CASH  11    CASH  150 
  c/b    9          c/b  109 
20  20      259  259   
 
Retained Earnings  General Reserve 
DR  CR  DR  CR      
Final Dividend   16  280  o/b      29  o/b 
Interim Dividend  15  114  Profit      49  RE 
Transfer to GR  49               
  c/b    314         c/b  78     
394  394      78  78   
 
 

   

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Q2: Question 1 (adapted) - Final Exam – Semester 1, 2009

1. Calculate the amount of depreciation expense that is included in the Other Expenses account
by using relevant T-accounts. (3 marks)
 
 
Acc. Depreciation ‐ Buildings  Acc. Depreciation ‐ Equipment 
DR  CR  DR  CR 
Disposal  45  81  o/b  Disposal  43  67  o/b 
     29  Exp.  9  Exp. 
c/b     65         c/b   33        
110  110      76  76   
     
 
Total depreciation expense = 29,000 + 9,000 = 38,000

2. Operating cash flows for JNT Ltd. using the direct method (7 Marks):
JNT Ltd.
Operating Cash Flows for Year Ended 30 June 2008
$’000 $’000
Cash flows from Operations
Receipts from customers 1,308
Dividends received 3
Payments to suppliers (851)
Payments for other expenses (17)
Payments for insurance (18)
Payments for income tax (76)
Payments for interest expense (27)
Cash Flows from Operating Activities $322

 
WORKINGS: 
 
Accounts Receivable  Allowance for Doubtful Debts 
DR  CR  DR  CR 
o/b      430  87  Prov.  A/c Rec    87  21  o/b 
sales   1,485  1,308  CASH        
      76  Bad debts. 
      520  c/b  c/b  10  exp 
1,915  1,915  97  97 
 
Accounts Payable  Inventory 
DR  CR  DR  CR 
  302  o/b  o/b  325  986  COGS 
 CASH  851  836  purchases  836 
  c/b    287              175  c/b      
1,138  1,138      1,161  1,161   
 
 
 

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 Accrued Expenses 
DR  CR 
    28  o/b 
 CASH  17  15  Exp. 
c/b  26     
43  43   
Other expenses less Depreciation: $53,000 ‐ $38,000 = $15,000 
 
Prepaid Insurance  Income Tax Payable 
DR  CR  DR  CR 
o/b  5  12  Exp.   Cash  76  32  o/b 
Cash  18    74  Exp. 
 11   c/b     c/b   30        
23  23      106  106   
     
 
Interest Payable 
DR  CR 
    19  o/b  
 Cash  27  27  Exp. 
 c/b    19 
46  46   
  
 
   

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Q3: Knight Ltd
Q3: Knight Ltd.
Knight Ltd
Statement of Cash flows
for the year-ended 30 June 2010

$'000s $'000s
Cash from Operations
Receipts from Customers 330
Payments to suppliers and employees (254)
Net cash flow from operations 76

Cash from investing

Payment for the purchase of plant (110)
Net cash from investing (110)

Cash from financing

Proceeds on sale of debentures 65
Proceeds on issue of shares 40
Net cash flow from financing 105

Net cash flows 71

Cash opening balance 20
Cash closing balance $91

A note to students: This question requires you to prepare a statement of Cash Flows. Therefore, the
final answer should be a Statement of Cash Flow, NOT various T-Accounts. The T-Accounts in this
solution only help you to prepare the statement of Cash Flow.

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WORKINGS:
Operating Activities

Accounts Receivable
Dr Cr
o/b 40 330 2)
1) 350 60 c/b
390 390

1) Dr Accounts Receivable 350

Cr Sales 350

2) Dr Cash 330
Cr Accounts Receivable 330

Inventory
Dr Cr
o/b 80 100 3)
4) 110 90 c/b
190 190

3) Dr COGS 100
Cr Inventory 100

4) Dr Inventory 110
Cr Accounts Payable 110

Accounts Payable
Dr Cr
5) 130 60 o/b
c/b 40 110 4)

170 170

5) Dr Accounts Payable 130

Cr Cash 130

6) Dr Salary Expense 20
Cr Salaries Payable 20

Salaries Payable
Dr Cr
7) 24 10 o/b
c/b 6 20 6)
30 30

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 7) Dr Salaries Payable 24
Cr Cash 24

Accum. Depreciation
Dr Cr
40 o/b
c/b 140 100 8)
140 140

8) Dr Depreciation Expense 100

Cr Accumulated Depreciation 100

Other Expenses less depreciation expense (180-100) = 80

9) Dr Other Expenses 80
Cr Accrued Expenses 80

Accrued Expenses
Dr Cr
30 o/b
10) 100 80 9)
c/b 10
110 110

10) Dr Accrued Expenses 100

Cr Cash 100

Investing Activities
Plant
Dr Cr
o/b 200
11) 110
310 c/b
310 310

11) Dr Plant 110

Cr Cash 110

Financing Activities
Debentures
Dr Cr
25 o/b
65 12)
c/b 90
90 90

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 12) Dr Cash 65
Cr Debentures 65

Share Capital
Dr Cr
150 o/b
40 13)
c/b 190
190 190

13) Dr Cash 40
Cr Share Capital 40

   

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Q4: Question 3 – Final Exam 2013s1 – Adapted

MintyFresh Ltd
Cash Flow Statement
30 June 2010
$’000 $’000
Cash flows from Operating activities
Cash received from customers 434
Cash paid to suppliers (350)
Cash paid for other expenses (8)
Cash paid for income tax (30)
Cash inflow from operations 46

Cash flows from Investing activities

Proceeds on sale of PPE 84
Cash paid for investment in SaliorToys Ltd (20)
Cash paid for PPE (100)
Cash outflows from investing activities (36)

Workings:

Accounts Receivable  Allowance for Doubtful Debts 
DR  CR  DR  CR 
o/b  159  27  ADD  A/c Rec    27  24  o/b 
sales  462  434  CASH     18 
       160  c/b  c/b   15       
 621  621   42  42 

Accounts Payable  Inventory 
DR  CR  DR  CR 
  180  o/b  o/b  152  345  COGS 
 CASH  350    purchases  345 
  c/b    175         345  purchases         152  c/b      
525  525      497  497   

Accrued Expenses                              Acc. Dep. ‐ PPE 
DR  CR  DR  CR 
 CASH  8  19  o/b  Write‐off  29  46  o/b 
 c/b    58  47  Exp.   c/b  20  3  Exp. 
66  66      49  49   
 
Other expenses – Depreciation Expense = Cash Expenses 

50 – 3 = 47 

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 PPE 
DR  CR 
o/b  145   
purchase        100*  113  Sale 
    132   c/b 
245  245 
 

DR Cash     84 
DR Acc. Depreciation – PPE  29 
CR PPE          113 

Note: *The purchase of 100,000 PPE was indicated in the revised version of the
question. Therefore, 145 + 100 -132 = 113 sold PPE.

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Q5: Additional Question 1

Tardis Ltd
Cash Flow Statement
31 December 2014
$’000 $’000

Cash Flows from Operating Activities

Cash received from customers 177,157
Cash received for interest revenue 2,340
Cash paid to suppliers (146,235)
Cash paid for other expenses (19,904)
Cash paid for tax expenses (1,654)
Cash paid for interest expense (3,000)
Cash inflows from Operations 8,704

Cash Flows from Investing Activities

Cash paid for purchase of PPE (14,217)
Cash outflows from Investing (14,217)

Cash Flows from Financing Activities

Proceeds from debentures 12,794
Cash paid for dividends (6,000)
Cash inflows from Financing 6,794

Net Cash Flows $1,281

Cash at the beginning of the period 3,554
Cash at the end of the period $4,835

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Workings:

Accounts Receivable 
DR  CR 
o/b       8,529 
sales  180,000  177,157  CASH 
      11,372  c/b 
 188,529  188,529 

Accounts Payable  Inventory 
DR  CR  DR  CR 
  10,490  o/b  o/b  15,637  136,456  COS 
 CASH  146,235    purchases  142853 
  c/b    7,108       142,853  purchases         22,034  c/b      
153,343  153,343      158,490  158,490   

Prepaid Expenses                              Acc. Dep. ‐ PPE 
DR  CR  DR  CR 
 o/b  2,132  20,615  Other expenses      14,215  o/b 
cash   19,904  1,421  c/b   c/b  18,480  4,265  Exp. 
22,036  22,036      18,480  18,480   
 

Other expenses – Depreciation Expense = Cash Expenses 

24,880 – 4,265 = 20,615 

Property, Plant & Equipment 
DR  CR 
 o/b  49,755   
Cash  14,217  63,972  c/b 
63,972  63,972   

Share Capital  Retained Profits 
DR  CR  DR  CR 
  35  o/b  dividends  6,000  19,902   o/b 
       16,350  profits 
  c/b    35               c/b      30,252 
35  35      36,252  36,252   

There were no share issues during the period.

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Q6: Additional Question 2

Wine & Knight Company

Cash Flow Statement
31 December 2014

$’000 $’000
Cash flows from operations
Receipts from customers 278
Receipts of interest 1
Payments to suppliers (179)
Payments for interest expense (5)
Payments for other expenses (7)
Cash paid for wages & salaries (16)
Payments of tax expense (18)
Cash inflows from operations 54

Cash flows from investing

Payments for Land and Buildings (32)
Payments for Plant and Machinery (13)
Cash outflows from investing (45)

Cash flows from financing

Proceeds on share issue 10
Final dividend paid (15)
Interim dividend paid (2)
Payment of loan (10)
Proceeds on loan 17
Cash flows from financing 0

Net cash flows for the period 9

Cash at the beginning of the period 2
Cash at the end of the period 11

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Workings:

Accounts Receivable  Inventory 
DR  CR  DR  CR 
o/b    56  o/b  16  143  COGS 
sales  272  278  cash    
       50  c/b  purchases  147    20  c/b  
 328  328  163   163 
 
Accounts Payable  Accrued Expenses 
DR  CR  DR  CR 
  47  o/b  cash  7  8  o/b 
 cash  179    c/b  10  9  Other 
  c/b    15         147  purchases         expenses 
194  194      17  17   
                               
Prepaid interest expense                                  Income tax payable 
DR  CR  DR  CR 
 o/b  11  7  Interest exp. cash  18  18  o/b 
tax 
  cash  5  9  c/b   c/b  26  26  expense 
16  16      44  44   

Share Capital  Retained Profits 
DR  CR  DR  CR 
  123  o/b  Final div.  21  13   o/b 
       Share  Interim div  2  64  profits 
  c/b    133         10   issue   c/b      54 
133  133      77  77   

Land & Buildings  Plant & Machinery 
DR  CR  DR  CR 
o/b  97    o/b  203 
 Cash      Cash 
purchase      32        129  c/b   purchase  13  216  c/b 
129        216  216   

Loan 
DR  CR 
Cash paid  10*  118  o/b 
Cash 
  c/b    125         17  received 
135  135   

Note: *Cash paid on loans $10,000 is given in the question. The missing amount is the
received cash from new loans.

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Q7: Question 1, Mid-session Exam 2006s2 (modified)

(a) Wages expense = 192,000

(b) Depreciation expense = 64,000
(c) Insurance expense = 10,000
(d) Interest expense = 15,000

Wages Payable  Accum. Depn ‐ Buildings 
DR  CR  DR  CR 
cash      182  21  o/b      170  o/b 
Dep. 
c/b         31  192  Wages exp.  c/b     193   23  Exp 
213  213  193  193 

Accum. Depn ‐ Equipment  Prepaid Insurance 
DR  CR  DR  CR 
Insurance 
Write‐off        45     148  o/b  o/b      11    10  Expense 
c/b      144  41  Depn exp.  Cash        8   9 
    189  189  19  19 
 

Total depreciation expense = 23,000 + 41,000 = $64,000

Interest Payable 
DR  CR 
             cash                5  0  o/b 
     15  Interest expense 
  c/b    10             
15  15   
 

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(e) Required: Prepare the following sections of the cash flow statement: investing and
financing for AFM Ltd.

AFM Ltd
Cash Flow Statement
30 June 2006

$’000 $’000

Cash flows from investing activities

Proceeds on disposal of equipment 63
Cash paid for buildings (110)
Cash paid for equipment (50)
Cash outflows in investing activities (97)

Cash flows from financing activities

Payment for final dividends (88)
Payment of interim dividends (65)
Payment of borrowings (60)
Proceeds of long-term bonds payable 240
Cash inflows from financing activities (27)

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Workings:

                                      Land 
DR  CR 
 o/b  245   
revaluation  50  295  c/b 
295  295   
Therefore, there were no sales or purchases of land for the period – only the revaluation.

                                     Buildings 
DR  CR 
 o/b  350   
cash  110  460  c/b 
460  460   

There was a purchase of Buildings for $110,000.

                                     Equipment 
DR  CR 
 o/b  285  65  sale 
cash  50  270  c/b 
335  335   
DR Cash 63
DR Acc. Depn – Equipment 45
CR Gain on sale 43
CR Equipment 65
Share Capital 
DR  CR 
                 275  o/b 
   c/b    320  45  Bonus issue 
320  320   
There was no share issue for cash, only the bonus share issue. 

Retained earnings 
DR  CR 
Final div  93  570  o/b 
 Interim Div.  65  221  Profit 
  c/b    633            
791  791   
       
Revaluation Reserve 
DR  CR 
Bonus issue      45  45  o/b 
     50  Land 
  c/b    50            
95  95   
No other movements in revaluation reserve – other than Land revaluation and the bonus share 
issue. 

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