CHAPTER 7 Statement of cash flows 311Required
a. What is the actual amount of cash paid for other expenses during the period?
b. Compare the cash basis of accounting with the accrual basis of accounting.
c. Assess the information benefits of both accounting approaches.7.29 LO3
The following list contains activities that may be added or subtracted from operating profit when
reconciling to cash flows from operating activities. Indicate whether each activity is added,
subtracted or irrelevant.
a. Increase in accrued expenses
b. Decrease in interest payable
c. Increase in plant, property and equipment
d. Depreciation expense
e. Decrease in inventory
f. Income taxes paid
g. Decrease in prepaid expenses
h. Proceeds from sale of shares
i. Receipt from a customer
j. Decrease in long-term debt7.30 LO3
Will and Grace Partners reported a profit of $67 000 for the year. The statement of profit or loss
also showed depreciation expense of $7000 and a loss on the sale of a motor vehicle of $3000.
The balance sheet showed an increase in accounts receivable of $4000 for the year, a decrease in
inventory of $3000 and an increase in accounts payable of $4000.
Required
Prepare a reconciliation of profit to cash flows from operating activities using the indirect method
as illustrated in the chapter.7.31 LO3
House designs Ltd had a $54 000 net loss for 2017. A dividend of $18 000 was paid during the year
and depreciation expense was $13 000. An inspection of the balance sheet showed the following
working capital accounts.1 Jan 2017 31 Dec 2017
Cash
Accounts receivable
Inventory
Prepayments
Accounts payable
Accrued expenses$10 000
12 000
16 000
4 500
14 000
6 000$8 000
14 000
10 000
3 000
18 000
8 000Required
Calculate whether House Designs Ltd generated any cash from its operations during 2017.7.32 LO4
The financial information below has been extracted from the accounts of Coconut Plantations Pty Ltd.
Jo Geter, the sole shareholder, wants to evaluate the cash position of her company and understands she
will need to calculate some cash-based ratios to do this. She has asked for your assistance as you are
studying a course in accounting. Help your friend by calculating some cash-based ratios.Cash from operating activities
Capital expenditure
Current liabilities
Non-current liabilities
Sales
Dividend paid$170 600
160 000
148 400
131 000
1550 000
14 790