I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

Part of a company's statement of cash flows is shown below.  

 

$'000 

Operating profit 

8,640 

Depreciation charges 

(2,160) 

Increase in inventory 

(330) 

Increase in accounts payable 

440 

The following criticisms of the extract have been made.  

1 

Depreciation charges should have been added, not deducted 

2 

Increase in inventory should have been added, not deducted  

3 

Increase in accounts payable should have been deducted, not added  

Which of the criticisms are valid? 

A 

2 and 3 only 

B 1 

only 

C 

1 and 3 only 

D 2 

only 

(2 marks) 

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           PRACTICE QUESTION BANK 

 

506

 

85 

Flail Co commenced trading on 1 January 20X1 with a medium-term loan of $21,000 and a 

share issue which raised $35,000. The company purchased non-current assets for $21,000 

cash and during the year to 31 December 20X1 entered into the following transactions. 

(i) 

Purchases from suppliers were $19,500, of which $2,550 was unpaid at the year end. 

(ii) 

Wages and salaries amounted to $10,500, of which $750 was unpaid at the year end. 

(iii) 

Interest on the loan of $2,100 was fully paid in the year and a repayment of $5,250 was made. 

(iv) 

Sales turnover was $29,400, including $900 receivables at the year end. 

(v) 

Interest on cash deposits at the bank amounted to $75. 

(vi) 

A dividend of $4,000 was proposed as at 31 December 20X1. 

(a) 

You are required to prepare Flail Co's statement of cash flows for the year ended