Accounting Business Reporting for Decision Making

CHAPTER 7 Statement of cash flows 303

c. Recorded depreciation of $32 000 for some equipment.

d. Paid $150 000 to a supplier.

e. Acquired a parcel of land in exchange for some shares.

f. Received a dividend from an investment in another company.

g. Paid yearly insurance by cash.

h. Purchased a new truck for $50 000 cash.

i. Sold a major piece of equipment for cash.

j. Paid salaries and wages.

SOLUTION TO 7.1

Transaction Classification Inflow/outflow

a. Paid dividend of $1 million to shareholders. Financing Outflow

b. Collected $356 000 from a major accounts

receivable.

Operating Inflow

c. Recorded depreciation of $32 000 for

some equipment.

Non-cash Not recorded in statement

of cash flows

d. Paid $150 000 to a supplier. Operating Outflow

e. Acquired a parcel of land in exchange for

some shares.

Non-cash Recorded in notes to the

statement of cash flows

f. Received a dividend from an investment

in another company.

Investing/

operating

Inflow

g. Paid yearly insurance by cash. Operating Outflow

h. Purchased a new truck for $50 000 cash. Investing Outflow

i. Sold a major piece of equipment. Investing Inflow

j. Paid salaries and wages. Operating Outflow

7.2 The statement of profit or loss for Harvey Ltd for the year ended 31 December 2017, and the

balance sheets as at 31 December for 2016 and 2017, are shown below. You are required to complete

a statement of cash flows, and reconcile the cash from operating activities to the profit after tax.

Harvey Ltd

Statement of profit or loss for the year ended 31 December 2017

$’000 $’000

Sales

Cost of sales

Opening inventory

+ Inventory purchases

25

264

368

• Closing inventory

289

32 257

Gross profit 111

Operational expenses (including depreciation $7000)

Interest expense

43

6 49

Interest received

62

4

Profit before tax

Ta x

66

20

Profit after tax

Retained earnings, 31 December 2016

46

23

Dividend proposed

Retained earnings, 31 December 2017

69

20

49