IAS 7 Question 1

QUESTION 1: IAS 7 STATEMENT OF CASH FLOWS

The statement of financial position and statement of profit or loss for Klea for the year to 31st
March 2015 are provided below.

Statement of financial position as at 31st March 2015

2015 2014
$000 $000
Non-current assets
Intangible assets 300 200
Property, plant and equipment 3,450 1,600
Financial assets 400 200
4,150 2,000
Current assets
Inventory 3,200 2,000
Trade receivables 2,400 2,000
Cash and cash equivalents 32 580
5,632 4,580
9,782 6,580

Equity
Issued share capita l 3,000 2,000
Share premium account 838 560
Retained earnings 910 354
4,748 2,914

Revaluation surplus 1,000 -

Non-current liabilities
Interest-bearing loans and liabilities 1,600 2,000

Current liabilities
Bank overdraft 414 -
Trade payables 1,600 1,266
Taxation 420 400
2,434 1,666
Total equity and liabilities 9,782 6,580

Statement of profit or loss for the year ended 31st March 2015
$000 $000
Revenue 10,000
Other income 100
Change in inventory of finished goods and WIP 1,300
11,400
Raw materials and consumables used 4,000
Employee benefits costs 3,000
Depreciation and amortization expense 800
Other expenses 1,724
Total expenses (9524)

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IAS 7 Question 1

1,876
Finance costs (320)
Finance income 50
Profit before tax 1,606
Income tax expense (650)
Profit for the year 956

Additional information
(i) Non-current assets
2015 2014
$000 $000
Cost Deprec’n Cost Deprec’n
Intangible assets 700 400 400 200
Property, plant & equipment 5,000 1,550 3,000 1,400

(ii) At 1 April 2014 land was revalued from $1million to $2 million.

(iii) During the year, plant and machinery costing $600,000 and depreciated by $ 500,000 was
sold for $150,000.

(iv) The interest bearing loans relate to debentures which were issued at their nominal value.
$400,000 of these debentures were redeemed at par during the year.

(v) Ordinary shares were issued for cash during the year.

(vi) $100,000 of current asset investments held as cash equivalents were sold during the year
for $94,000.

(vii) Dividends paid in the year were $200,000 relating to the 2014 proposed dividend and a
$200,000 interim dividend for 2015.

Required
Prepare a statement of cash flows for Klea for the year ended 31 March 2015 in accordance with
IAS 7 using the indirect method.

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IAS 7 Question 1

ANSWER – QUESTION1: IAS 7 STATEMENT OF CASH FLOWS

KLEA
Statement of cash flows
For the year ended 31 March 2015
Cash flows from operating activities: $000
Profit before tax 1,606
Adjustments for:
Depreciation / amortization of non-current assets W4 650 + W5 200 850
Gain on disposal W1 (50)
Finance income (50)
Finance costs 320
Operating profit before working capital changes 2,676
Increase in inventory (2,000 – 3,200) (1,200)
Increase in trade receivables (2,000 – 2,400) (400)
Increase in trade payables (1,600 – 1,266) 334
Cash generated from operations 1,410
Interest paid (320)
Income tax paid W6 (630)
Net cash from operating activities 460

Cash flows from investing activities:

Purchase of property, plant and equipment W2 (1,600)
Purchase of intangibles W3 (300)
Acquisition of long term investment (400 – 200) (200)
Proceeds from sale of asset 150
Net cash used in investing activities (1,950)

Cash flows from financing activities:

Shares issued [3,000+838] – [2,000+560] 1,278
Payment to redeem debentures (400)
Finance income received 50
Dividends paid (200 + 200) (400)
Net cash from financing activities 528

Net decrease in cash and cash equivalents (962)

Cash and cash equivalents at beginning of period 580
Cash and cash equivalents at end of period (32 – 414) (382)

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IAS 7 Question 1

Workings

W1 – Disposal A/C
PPE 600 Accumulated depreciation 500
Gain on disposal β 50 Cash 150
650 650

W2 – PPE
b/d 3,000 Disposal 600
Revaluation 1,000
Cash β 1,600 c/d 5,000
5,600 5,600

W3 – Intangible assets
b/d 400
Cash β 300 c/d 700
700 700

W4 – Accumulated Depreciation
Disposal 500 b/d 1,400
c/d 1,550 Depreciation β 650
2,050 2,050

W5 – Accumulated Amortization
b/d 200
c/d 400 Amortization β 200
400 400

W6 – Income Tax
Cash β 630 b/d 400
c/d 420 PL 650
1,050 1,050

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