Test Bank 8e Chapter.19 Accounting for extractive industries

Chapter 19 Testbank

1. A reporting entity is required to prepare a statement of cash flows that is in accordance with the requirements of AASB 107 and shall be presented as an integral part of the notes to the accounts.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-01 Understand what a statement of cash flows is, and why it is useful.
Section: Comparison with other financial statements
Topic: Comparison with other financial statements

2. In accordance with AASB 107 Statement of Cash Flows, cash payments to suppliers for goods and services are classified as cash flows from operating activities.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

3. In accordance with AASB 107 Statement of Cash Flows, dividends paid may be classified as an investing or a financing cash flow.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

4. In accordance with AASB 107 Statement of Cash Flows, cash receipts from sales of property, plant and equipment are classified as cash flows from operating activities.

5. A statement of cash flows is a forecast of net cash flows from operating, investing and financing activities.

6. In accordance with AASB 107 Statement of Cash Flows, a bonus share issue is to be classified under financing activities.

7. The statement of cash flows is argued by researchers to be a more reliable statement than accrual statements.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-04 Understand how the statement of cash flows provides information that is a useful complement to the statement of financial position, the statement of changes in equity, and the statement of profit or loss and other comprehensive income.
Section: Comparison with other financial statements
Topic: Comparison with other financial statements

8. The statement of cash flows effectively provides a reconciliation of the opening and closing cash balances in the statement of financial position.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Comparison with other financial statements
Topic: Comparison with other financial statements

9. While the statement of cash flows is presently required along with the accrual statements, taking a balanced view, it would be sufficient to meet the accountability needs of general purpose financial statement users on its own.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-04 Understand how the statement of cash flows provides information that is a useful complement to the statement of financial position, the statement of changes in equity, and the statement of profit or loss and other comprehensive income.
Section: Comparison with other financial statements
Topic: Comparison with other financial statements

10. The statement of cash flows should be subdivided into selling, financing and investing categories.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Classification of cash flows
Topic: Classification of cash flows

11. If a business consistently has positive cash flows from financing and negative cash flows from investing and operating activities, this is a positive sign for the business.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-04 Understand how the statement of cash flows provides information that is a useful complement to the statement of financial position, the statement of changes in equity, and the statement of profit or loss and other comprehensive income.
Section: Classification of cash flows
Topic: Classification of cash flows

12. AASB 107 requires disclosures about non-cash financing and investing activities.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-04 Understand how the statement of cash flows provides information that is a useful complement to the statement of financial position, the statement of changes in equity, and the statement of profit or loss and other comprehensive income.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

13. AASB 107 requires ledger accounts to be reconstructed in order to calculate cash flows from operating activities.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

14. To calculate the cash flow associated with an accrued expense, any increase in the associated liability should be added to the expense.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

15. To calculate the cash flow from the issue of debentures, the face value of the debentures would have to be adjusted by deducting any premium or adding any discount on issue.

16. Sharma (1996) argues that cash flows from operating activities divided by current debt should replace the current ratio as a measure of liquidity.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-08 Understand how a statement of cash flows might be used within contractual arrangements negotiated by the organisation.
Section: Contractual implications
Topic: Contractual implications

17. In accordance with AASB 107, non-cash investing and financing transactions are required to be included in the statement of cash flows.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

18. All cash flows from investing and financing activities are required to be reported on a gross basis.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

19. Entities are encouraged to report their operating cash flows using the direct method.

20. Both IASB and FASB propose that financial statements should be presented in a more aggregated manner.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-09 Be aware of likely future developments pertaining to the presentation of statements of cash flows.
Section: Potential future changes to the statement of cash flows
Topic: Potential future changes to the statement of cash flows

21. The statement of cash flows may assist in determining the ability of an entity to:

A. generate cash flows.
B. obtain internal finance.
C. meet its financial commitments to customers.
D. generate cash flows and meet its financial commitments to customers.

22. AASB 107 defines cash equivalents to include:

A. highly liquid investments with short periods to maturity that are readily convertible to cash on hand at the investor's option and are subject to an insignificant risk of changes in value.
B. term borrowing.
C. working capital items such as prepayments and accruals.
D. highly liquid investments with short periods to maturity that are readily convertible to cash on hand at the investor's option and are subject to an insignificant risk of changes in value and term borrowing.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-05 Understand how we define 'cash' and 'cash equivalents' for the purposes of a statement of cash flows and appreciate that the definitions mean that statements of cash flows address transactions beyond those simply involving 'cash'.
Section: Defining cash and cash equivalents
Topic: Defining cash and cash equivalents

23. Accounts that represent cash or cash equivalents include:

A. bank overdrafts.
B. accounts receivable.
C. short-term money market deposits.
D. bank overdrafts and short-term money market deposits.

24. AASB 107 states that for a money market deposit to be classified as cash:

A. it must normally have a maturity of 3 months or less from the date of acquisition.
B. it must be scheduled to mature within the operating cycle of the entity.
C. it must normally mature 3 months or less from balance date.
D. it must be within 1 month of maturing at balance date.

25. An item considered to be a cash equivalent in one company may not be considered as such in another. This is because:

A. the operating cycle varies between companies.
B. companies have different balance dates and this will affect the measurement of the term to maturity.
C. companies use highly liquid items for purposes other than as part of their cash-management function.
D. the working capital management policies of companies vary so an item may be considered very liquid in one company and not in another.

26. Investing activities are defined by AASB 107 as those that:

A. relate to the changing size or composition of the capital management structure of the entity.
B. relate to the acquisition or disposal of inventory.
C. relate to the acquisition and/or disposal of non-current assets and other investments not included in cash equivalents.
D. relate to changes in capital or liabilities used to fund long-term assets.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-05 Understand how we define 'cash' and 'cash equivalents' for the purposes of a statement of cash flows and appreciate that the definitions mean that statements of cash flows address transactions beyond those simply involving 'cash'.
Section: Classification of cash flows
Topic: Classification of cash flows

27. What method does AASB 107 encourage for the reporting of cash flows from operating activities and what does it mean for the presentation of this category in the statement of cash flows?

A. The derivative method is required. This means that the amounts are presented as increases or decreases in balance sheet working capital accounts.
B. The indirect method is required. This means that the cash flows are presented as accrual amounts from the operating section of the statement of comprehensive income adjusted for non-cash effects.
C. The direct method is required. This means that the gross cash flows from operating items are presented.
D. Either the derivative or the direct method is required. For the derivative method this means that the amounts are presented as increases or decreases in the statement of financial position or for the direct method, this means that the gross cash flows from operating items presented is permitted.

28. Where the entity uses the direct method a note to the accounts reconciling cash flows from operating activities to net profit is required because:

A. complex calculations are required to convert cash-based revenues.
B. items such as depreciation are only recorded in a cash system and not an accrual system.
C. there is likely to be a disparity between cash flows from operations under AASB 107 and the profits reported in the statement of comprehensive income.
D. the direct method is required under AASB 107.

29. Items that must be separately disclosed in the statement of cash flows include:

A. cash sourced from derivative instruments.
B. borrowing costs.
C. income taxes paid.
D. borrowing costs and income taxes paid.

30. AASB 107 requires that a note to the accounts shall disclose a reconciliation of cash flows from operating activities to operating profit or loss after income tax as reported in the statement of comprehensive income. The correct adjustments to the operating profit/loss after tax include:

A. add; depreciation expense, gain on sale of plant and equipment, increase in interest payable, increase in inventories.
B. subtract; increase in future income tax benefit, increase in accounts receivable, loss on sale of plant and equipment.
C. add; increase in accounts payable, increase in income taxes payable, increase in deferred taxes payable.
D. subtract; amortisation expense, increase in future income benefit, increase in interest payable.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-07 Be aware of the various supporting notes that must accompany a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

31. AASB 107 requires disclosure of information about transactions and events that do not result in cash flows during the financial year, including:

A. a commitment under an operating lease.
B. the use of forward exchange contracts to hedge purchases.
C. acquisition of assets by entering into finance leases.
D. liquidation of investments.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

32. Which of the following tables provides an appropriate classification for the items listed for the statement of cash flows for a retailing business?

AACSB: Analytic
Difficulty: Medium
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Classification of cash flows
Topic: Classification of cash flows

33. Railway Corporation provides the following information that relates to the period ended 30 June 2015:

What amount of cash was received from customers during the year?

A. $383 000
B. $363 000
C. $403 000
D. $397 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

34. DryGrass Ltd provides the following information that relates to the period ended 30 June 2015:

What amount of cash was received from customers during the year?

A. $775 000
B. $580 000
C. $740 000
D. $615 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

35. Mopoke Ltd provides the following information that relates to the period ended 30 June 2014:

What amount of cash was received from customers during the year?

A. $1 780 000
B. $930 000
C. $1 720 000
D. $920 000

AACSB: Reflective thinking
Difficulty: Hard
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

36. Mistril Ltd provides the following information for the period ended 30 June 2015:

What are the cash flows from interest, dividends and tax for the period?

A. Cash inflow from interest $34 000; cash inflow from dividends $13 000; cash outflow tax $14 000
B. Cash inflow from interest $54 000; cash inflow from dividends $7000; cash outflow tax $16 000
C. Cash inflow from interest $66 000; cash inflow from dividends $7000; cash outflow tax $6000
D. Cash inflow from interest $84 000; cash inflow from dividends $25 000; cash outflow tax $82 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

37. Mogull Ltd provides the following information for the period ended 30 June 2015:

What are the cash flows from interest, dividends and tax for the period?

A. Cash outflow from interest $97 000; cash inflow from dividends $18 000; cash outflow tax $24 000
B. Cash outflow from interest $67 000; cash inflow from dividends $20 000; cash outflow tax $12 000
C. Cash outflow from interest $63 000; cash inflow from dividends $4000; cash outflow tax $18 000
D. Cash outflow from interest $7000; cash inflow from dividends $20 000; cash outflow tax $16 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

38. Up and Away Unlimited provides the following information for the period ended 30 June 2014:

What is the cash paid to suppliers for the period?

A. $376 000
B. $415 000
C. $474 000
D. $426 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

39. Cod Ltd provides the following information for the period ended 30 June 2014:

What is the cash paid to suppliers for the period?

A. $82 000
B. $144 000
C. $184 000
D. $122 000

40. Hansard Ltd provides the following information for the period ended 30 June 2015:

What was the amount of cash used to acquire plant and equipment?

A. $55 000
B. $16 000
C. $23 000
D. $18 000

41. Hybrid Ltd provides the following information for the period ended 30 June 2015:

What was the amount of cash used to acquire plant and equipment?

A. $626 000
B. $114 000
C. $520 000
D. $270 000

42. Joplyn Ltd provides the following information for the period ended 30 June 2015:

All transactions are in cash unless otherwise indicated. What is the net cash flow from investing activities?

A. Cash inflow $80 000
B. Cash inflow $30 000
C. Cash outflow $100 000
D. $0

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

43. Jaunty Ltd provides the following information for the period ended 30 June 2015:

All transactions are in cash unless otherwise indicated. What is the net cash flow from investing activities?

A. Net cash outflow $770 000
B. $0
C. Net cash inflow $230 000
D. Net cash outflow $860 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

44. Sonic Co Ltd provides the following information for the period ended 30 June 2015:

During the period Sonic Co Ltd issued debentures with a face value of $1 000 000 at a premium of $560 000. All transactions are in cash unless otherwise indicated. What is the net cash flow from financing activities for the period?

A. Net cash outflow $480 000
B. Net cash outflow $290 000
C. Net cash inflow $270 000
D. Net cash inflow $1 080 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

45. Heady Ltd provides the following information for the period ended 30 June 2014:

During the period Sonic Co Ltd issued debentures with a face value of $2 000 000 at a discount of $260 000. All transactions are in cash unless otherwise indicated. What is the net cash flow from financing activities for the period?

A. Net cash outflow $1 450 000
B. Net cash outflow $6000
C. Net cash inflow $1 154 000
D. Net cash inflow $1 390 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

46. The following information is provided for Unique Ltd for the period ended 30 June 2015:

All transactions are in cash unless otherwise indicated. What is the net cash flow from operating activities for the period?

A. Net cash inflow $596 000
B. Net cash inflow $426 000
C. Net cash inflow $536 000
D. Net cash inflow $486 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

47. The following information is provided for Identikit Ltd for the period ended 30 June 2015:

All transactions are in cash unless otherwise indicated. What is the net cash flow from operating activities for the period?

A. Cash inflow $371 000
B. Cash inflow $298 000
C. Cash outflow $554 000
D. Cash inflow $530 000

48. When creating a statement of cash flows, certain items must be disclosed separately because of their significance, including:

A. discounts received from suppliers.
B. interest, both received and paid.
C. discounts received from suppliers, and interest both received and paid.
D. interest and tax payments.

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

49. Sharma (1996) suggests that a cash-flow based measure of retained cash flows from operations (RCFFO) may be an important indicator of financial flexibility. How is RCFFO measured?

A. The level of cash retained, calculated by deducting net cash flows from investing from the net cash flows from operations.
B. The level of cash retained after meeting all operating costs and priority payments such as interest costs and dividends.
C. The level of cash retained after meeting all operating costs and deducting or adding as appropriate the cash flows from financing and investing activities.
D. The level of cash retained, calculated by deducting net cash flows from financing from the net cash flows from operations.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 19-08 Understand how a statement of cash flows might be used within contractual arrangements negotiated by the organisation.
Section: Contractual implications
Topic: Contractual implications

50. Saints Ltd is preparing a statement of cash flows for the year ended 30 June 2014. You are the accountant of the entity and have collected the following data:

What is the amount of net cash used in investing and financing activities respectively?

A. $20 000; ($286 000)
B. $(340 000); $74 000
C. $(348 000); ($22 000)
D. $(380 000); $74 000

51. Swans Machinery Ltd reported a net profit of $3 000 000 for the year ended 30 June 2014. The following changes occurred in the statement of financial position:

Additional information:

During the year Swans Ltd sold equipment with a cost of $250 000 and had accumulated depreciation of $120 000 for a gain of $50 000.

On 30 June 2014 Swans Ltd purchased equipment costing $500 000 with $200 000 in cash and a note payable for $300 000.

Depreciation expense for the year was $520 000.

What is the amount of net cash from operating activities and net cash used in investing activities respectively for the year ended 30 June 2014?

A. $3 470 000; ($20 000)
B. $3 520 000; ($20 000)
C. $3 470 000; ($200 000)
D. $3 520 000; ($500 000)

52. Crows Ltd's books show the following information for the preparation of its statement of cash flows for the year ended 30 June 2014:

What is the amount of net cash from operating activities for the year ended 30 June 2014?

A. $445 800
B. $453 600
C. $454 200
D. $489 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

53. Lions Ltd engaged in the following activities for the year ended 30 June 2014:

Sold shares in Kangaroo Ltd for $70 000. The investment had a carrying amount of $66 000.

Purchased shares in Cats Ltd for $52 000.

Purchased government bonds for $100 000.

Issued Lions Ltd shares for $100 000.

What is the net cash flow used in investing activities?

A. $18 000
B. ($18 000)
C. ($148 000)
D. ($82 000)

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

54. Bulldogs Ltd had the following activities related to their financial operations:

Paid $1 125 000 for the early retirement of convertible notes (amortised cost of $1 110 000)

Paid cash dividends of $93 000. Preference shares with carrying amount of $120 000 were converted to ordinary shares.

What is net cash used in financing activities for the year ended 30 June 2014?

A. ($1 017 000)
B. ($1 032 000)
C. ($1 125 000)
D. ($1 218 000)

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

55. In accordance with AASB 107, what is the appropriate classification for the conversion of preference shares to ordinary shares?

A. Inflow in investing activity.
B. Inflow in financing activity.
C. Non-cash investing item.
D. Non-cash financing item.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

56. Which combination is the appropriate operation to perform to the following accounts to reconcile net profit with net cash flows from operating activities?

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

57. Which combination is the appropriate operation to perform to the following accounts to reconcile net profit with net cash flows from operating activities?

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

58. The following are cash flow transactions for Mungo Ltd:

Which of the following combinations includes all of the transactions that will determine cash flows from operating activities of Mungo Ltd that are in accordance with AASB 107 Statement of Cash Flows?

A. I, II, III, IV and V
B. I, II, III, IV and VI
C. I, II, III and IV
D. I, II and III

59. The following are cash flow transactions for Wadonga Ltd:

Which of the following combinations includes all of the transactions that will determine cash flows from financing activities of Wadonga Ltd that are in accordance with AASB 107 Statement of Cash Flows?

A. I, III, IV and VI
B. II, III, IV and VI
C. III, IV and V
D. III, IV and VI

60. The following are cash flow transactions for Cootamundra Ltd:

Which of the following combinations includes all transactions that may by classified under investing activities of Cootamundra Ltd that are in accordance with AASB 107 Statement of Cash Flows?

A. I, II, III, IV, V and VI
B. I, II, IV and V
C. III, IV and VI
D. I, II and V

61. Which of the following statements is not in accordance with AASB 107 Statement of Cash Flows?

A. The statement of cash flows shall report cash flows during the period classified by operating, investing and financing activities.
B. Investing and financing transactions that do not require the use of cash or cash equivalents shall be excluded from a statement of cash flows.
C. Investing and financing activities that do not have a direct impact on current cash flows but affect the capital and asset structure of an entity should be included in the statement of cash flows.
D. Cash flows arising from taxes on income shall be separately disclosed and shall be classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities.

AACSB: Analytic
Difficulty: Medium
Learning Objective: 19-05 Understand how we define 'cash' and 'cash equivalents' for the purposes of a statement of cash flows and appreciate that the definitions mean that statements of cash flows address transactions beyond those simply involving 'cash'.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

62. The following are cash flow transactions for Greenfell Ltd:

Which of the following combinations includes all the non-cash investing and financing transactions of Greenfell Ltd that are required to be disclosed in the notes to the accounts as per AASB 107 Statement of Cash Flows?

A. I and II
B. I, II and VI
C. III, IV and V
D. III, IV and VI

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

63. Which of the following statements is correct in accordance with AASB 107 Statement of Cash Flows?

A. Cash repayments of amounts borrowed are classified under financing activities.
B. Cash proceeds from issuing equity instruments are classified under financing activities.
C. Cash payments to acquire property, plant and equipment are classified under investing activities.
D. Cash advances and loans made to other parties are classified under investing activities.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Calculating cash inflows and outflows
Topic: Calculating cash inflows and outflows

64. Walker (1987) claimed that 'one of the strongest antidotes to creative accounting is a requirement for statement of cash flows to have __________'.

A. previous year comparisons
B. disclosures
C. details of transactions
D. details of key accounts

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-04 Understand how the statement of cash flows provides information that is a useful complement to the statement of financial position, the statement of changes in equity, and the statement of profit or loss and other comprehensive income.
Section: Comparison with other financial statements
Topic: Comparison with other financial statements

65. Which of the following would not be an operating activity cash outflow?

A. Taxes paid.
B. Acquisition of goods and services.
C. Acquisition of intangible assets.
D. Employee benefits paid.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Classification of cash flows
Topic: Classification of cash flows

66. It is currently argued that the presentation of the various financial statements lack:

A. cohesiveness.
B. understanding.
C. clarity.
D. flexibility.

67. Traditional financial ratios such as the current ratio or acid-test ratios have come in to question as it is argued that they do not monitor the organisation's:

A. profitability.
B. going concern.
C. liquidity.
D. wealth.

68. Koko Black was founded in 2003. As of 2015 they wholly own stores in several Australian capital cities. Central to the premise of this young business is Mr Hills' desire to offer customers a 'chocolate experience', from the premium product to the refined service and stylish surroundings. In an interview in 2014, Mr Hills described the company as a private, family-run company and said they had relationships with banks to provide loans to fund expansions. In the years leading up to 2014, Koko Black was expanding yearly by three or four stores. Which of the following is the primary financing cash flows for Koko Black?

A. Bank loans.
B. General public share issue.
C. Private placement.
D. Bonds.

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.
Section: Classification of cash flows
Topic: Classification of cash flows

69. The following information was extracted from Randwick Ltd's statement of financial position:

	2010	2009
	$	$
Cash	25 000	19 000
Accounts receivable	176 000	82 000
Inventory	117 000	64 000
Buildings	31 000	51 000
Accounts payable	107 000	62 000
Accrued expenses	5000	6000
Interest payable	5000	2000
Income tax payable	10 000	4000

If Randwick had the following expenses in its statement of profit or loss, which of them was paid for with cash during the period?

I Wages expense

II Interest expense

III Income tax expense

IV Other expenses

A. I only
B. II only
C. IV only
D. III and IV only

AACSB: Reflective thinking
Difficulty: Easy
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

70. The prepaid insurance account for Darlinghurst Ltd had an opening balance of $4000 and a closing balance of $15 000. The following expenses and loss were extracted from the statement of profit or loss:

	$
Bad debt expense	15 000
Insurance expense	9 000
Other expenses	198 000
Interest expense	25 000
Loss on disposal of land	18 000

Which of the following amounts would appear as a debit in the prepaid insurance account?

A. Cash paid for insurance $9000
B. Closing balance $15 000
C. Insurance expense $9000
D. Cash paid for insurance $20 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

71. Fishsy Ltd had the following equity balances:

	2018	2017
	$000	$000
Share capital	491	420
Revaluation surplus	32	17
General reserve	78	29
Retained earnings	314	280

There was a bonus issue during the period declared out of the revaluation surplus account of $15 000.

Which of the following is included in the credit side of Share Capital T-account for Fishsy Ltd?

A. Closing balance 491 000
B. Cash proceeds on share issue 71 000
C. Cash proceeds on share issue 56 000
D. Opening balance 491 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

72. The following was extracted from the statement of financial position of Paddington Ltd:

2018

2017

$000

Land

172

149

Buildings

186

225

Accumulated depreciation—buildings

(75

)

(81

)

Equipment

437

Accumulated depreciation—equipment

(214

)

(149

)

Accrued expenses

Final dividends payable

Share capital

491

420

Revaluation reserve

General reserve

Retained earnings

314

280

The following additional information during the year is provided:

In Paddington Ltd's accrued expenses T-account, which of the following would be found on the credit side?

A. Other expenses of 198 000
B. Cash paid of 80 000
C. Closing balance of 28 000
D. Other expenses of 96 000

AACSB: Reflective thinking
Difficulty: Medium
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.
Section: Format of statement of cash flows
Topic: Format of statement of cash flows

Chapter 19 Testbank Summary

Category	# of Questions
AACSB: Analytic	3
AACSB: Reflective thinking	69
Difficulty: Easy	27
Difficulty: Hard	5
Difficulty: Medium	40
Learning Objective: 19-01 Understand what a statement of cash flows is, and why it is useful.	3
Learning Objective: 19-02 Understand the accounting requirements relating to the disclosure of information about an organisation's cash flows.	19
Learning Objective: 19-03 Understand how to construct a statement of cash flows in conformity with AASB 107 and understand how various cash flows are classified for the purposes of presenting a statement of cash flows.	23
Learning Objective: 19-04 Understand how the statement of cash flows provides information that is a useful complement to the statement of financial position, the statement of changes in equity, and the statement of profit or loss and other comprehensive income.	5
Learning Objective: 19-05 Understand how we define 'cash' and 'cash equivalents' for the purposes of a statement of cash flows and appreciate that the definitions mean that statements of cash flows address transactions beyond those simply involving 'cash'.	6
Learning Objective: 19-06 Understand the differences between cash flows from operations, cash flows from investing, and cash flows from financing activities, and be able to calculate them.	31
Learning Objective: 19-07 Be aware of the various supporting notes that must accompany a statement of cash flows.	1
Learning Objective: 19-08 Understand how a statement of cash flows might be used within contractual arrangements negotiated by the organisation.	3
Learning Objective: 19-09 Be aware of likely future developments pertaining to the presentation of statements of cash flows.	2
Section: Calculating cash inflows and outflows	33
Section: Classification of cash flows	6
Section: Comparison with other financial statements	7
Section: Contractual implications	3
Section: Defining cash and cash equivalents	4
Section: Format of statement of cash flows	17
Section: Potential future changes to the statement of cash flows	2
Topic: Calculating cash inflows and outflows	33
Topic: Classification of cash flows	6
Topic: Comparison with other financial statements	7
Topic: Contractual implications	3
Topic: Defining cash and cash equivalents	4
Topic: Format of statement of cash flows	17
Topic: Potential future changes to the statement of cash flows	2

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Aug 21, 2025

Chapter Name:

Chapter 19 Accounting for extractive industries

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Deegan

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