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    Ias7 Q8

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    Krishna 11

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    Ias7 Q8

    Uploaded by

    Krishna 11
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    IAS7-Q8

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    Ias7 Q8

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    Krishna 11

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    of 4

    IAS 7 Question 8

    QUESTION 8: IAS 7 STATEMENTS OF CASH FLOWS


    Following are the relevant extracts from the financial statements of Apollo Industry Limited, a listed
    company, for the year ended December 31, 2015.

    Statement of financial position as at December 31, 2015


    2015 2014
    $000 $000
    Issued, subscribed and paid up capital 25,000 20,000
    Un appropriated profit 20,900 22,000
    45,900 42,000
    Surplus on revaluation of property, plant & equipment 7,000 8,000

    Non-current liabilities
    Staff gratuity 1,400 1,190
    Deferred tax liability- net 590 -
    1,900 1,190
    Trade and other payables 4,200 6,250
    59,090 57,440

    Non-current assets
    Property, plant and equipment 35,000 25,500
    Capital work in progress 5,500 10,000
    Intangible assets 1,100 1,140
    41,600 36,640
    Deferred tax asset- net - 350
    Long term deposits and prepayments 400 300
    42,000 37,290
    Current Assets
    Tax refundable 950 800
    Other current assets 15,700 12,125
    Cash and bank balances 440 7,225
    17,090 20,150
    59,090 57,440

    Statement of comprehensive Income for the year ended December 31, 2015
    2015
    $000
    Sales 146,700
    Cost of sales (127,500)
    Gross profit 19,200
    Operating expenses (15,000)
    Financial charges (500)
    Other income 2,800
    (12,700)
    Profit before tax 6,500
    Tax expense - current (4,660)
    - deferred (940)
    Tax for the year (5,600)
    Profit after tax 900

    Page 1 of 4 (kashifadeel.com)
    IAS 7 Question 8

    Other relevant information is as under:


    (i) During the year, the company has issued 10% bonus shares.

    (ii) Depreciation and amortization for the year amounted to $7 million.

    (iii) WDV of assets disposed off during the year amounted to $1.2 million. (The assets had not
    been revalued)

    (iv) Other income includes interest earned on short term placements, amounting to $1 million.
    The remaining amount represents gain on disposal of property, plant and equipment.

    (v) Gratuity of $0.3 million was paid to outgoing employees.

    (vi) Intangible assets worth $ 50 thousand were acquired during the year.

    Required:
    Prepare the Statement of Cash Flows for the year ended December 31, 2015 in accordance with
    the requirements of IAS - 7 (Statement of Cash Flows) using ‘indirect method’.

    Page 2 of 4 (kashifadeel.com)
    IAS 7 Question 8

    ANSWER – QUESTION 8: IAS 7 STATEMENTS OF CASH FLOWS

    APOLLO INDUSTRY LIMITED


    Statement of cash flows
    For the year ended 31 December 2015
    Cash flows from operating activities: $000
    Profit before tax 6,500
    Adjustments for:
    Depreciation of non-current assets W1 5,910 + W2 90 6,000
    Gain on disposal of fixed assets (2,800 – 1,000) (1,800)
    Provision for gratuity W3 510
    Finance Income (1,000)
    Operating profit before working capital changes 10,210
    Increase in other current assets (12,125 – 15,700) (3,575)
    Decrease in trade payables (6,250 – 4,200) (2,050)
    Cash generated from operations 4,585
    Gratuity paid (300)
    Income tax paid W4 (4,810)
    Net cash used in operating activities (525)

    Cash flows from investing activities:


    Purchase of non-current assets W1 (13,110)
    Acquisition of intangible assets (50)
    Mark up received on short term placement 1,000
    Proceeds from sale of asset (1,200 + 1,800) 3,000
    Net cash used in investing activities (9,260)

    Cash flows from financing activities:


    Increase in share capital W5 3,000
    Net cash from financing activities 3,000

    Net decrease in cash and cash equivalents (6,785)


    Cash and cash equivalents at beginning of period 7,225
    Cash and cash equivalents at end of period 440

    Page 3 of 4 (kashifadeel.com)
    IAS 7 Question 8

    Workings:

    W1 – Non-current assets
    b/d (25,500 + 10,000) 35,500 Disposal 1,200
    Cash β 13,110 Revaluation reserve 1,000
    Acc. Depreciation (7,000 – 1,000 -
    90) 5,910
    c/d (35,000 + 5,500) 40,500
    48,610 48,610

    W2 – Intangible assets
    b/d 1,140 Accumulated amortization β 90
    Cash 50 b/d 1,100
    1,190 1,190

    W3 – Provision for staff gratuity


    Cash 300 b/d 1,190
    c/d 1,400 PL β 510
    1,700 1,700

    W4 – Advance Tax
    b/d 800 PL 4,660
    Cash β 4,810 c/d 950
    5,610 5,610

    W5 – Share Capital
    b/d 20,000
    Bonus shares (20,000 x 10%) 2,000
    c/d 25,000 Cash β 3,000
    25,000 25,000

    Page 4 of 4 (kashifadeel.com)

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