BU8101 Seminar 7

Statement of Comprehensive Income

Statement of Changes in Equity and
Statements of Cash Flows

AE1 - Cash
Classification
Type ofFlows
Activity
Increase/Decrease Action Taken

Qn
A

Operating

Decrease 20000

Deduct (20000)

Financing

Decrease 10000

Deduct (10000)

Operating

Decrease 1000

Deduct (1000)

Financing

Increase

Add

Operating

Decrease 5000

Deduct (5000)

Operating

Increase 15000

Add 15000

g.

Financing

Decrease (threemonths treasury

bills)

Deduct

h.

Investing

Decrease

Deduct

i.

Operating

Increase 135000

Add 135000

j.

Operating

Decrease 9000

(9000)

k.

No effect

l.

Operating
Investing

Increase 90000
Increase

(90000)
Add

m.

Investing

Decrease 35000

90000

n.

Investing

Increase

Add

 A. Operating because involved in income statement

B. Interest expense is operating expense, accrued for the previous
term
D. second statement, by periodic rule, not needed to consider
because cash has not been transferred, only plans
H. Use cash received in D, from the same period, to purchase land
J. Payment for whole 12 months, not just the current month so
have to decrease.
M. Gain on sale of plant asset (disposed equipment) (from table)
N. Loss on sale of investments (from table)

AE2
Cash Flow
Cash flow from operating
activities
Net Income

56000

AE2 (b)
To increase the cash flow,
Company should review on their accounts payable,
Accounts payable should be reviewed to be sure that
your companys cash is not being paid to supplier prior
to the required payment dates.
Accounts receivable should be closely monitored to
ensure customer to adhere to the agreed credit terms
and that terms
Stop/ minimise the payment of prepaid expenses.
To decrease the inventory turnover rate, by

AE3 (a)
Company is growing
Buying assets, good to manafacturing
Generating Excess Cash from OCF consistently because its positive.
Net Outflow and financing we dont know the cash flow
A dividend represents negative cash flow (outflow) from the Financing
Cash- Flow (FCF).
If we implement the 45000 dividend, then FCF will be negative and that
means that the company will use operating earnings to pay off the debt
instead of improving the companys long term financial standing.
If this 45000 dividend is implemented and FCF is positive and not
affected, company should proceed to do so.
If its negative, either not implement the dividend or decrease the
dividend amount.

Divide
nd

Not Im

AE3b)
2 unusual events that happened:
1. Company has used a lot of money on modernisation
of production facilities This affects the ICF, by
producing a negative cash flow.
The net outflow of the investing activity was unusually
high because the company modernised its production
facilities during the year.
2. Issuance of bonds payable and capital stocks- This
affects FCF, as they are financing activities.
The net cash flow from financing activities were
unusually high in the current year because of the
issuance of bonds payable and capital stocks.

 Solutions for Problem 1: Invested in new production

facilities may improve company production rates, hence
improving our sales, boosting our operating cash inflow. Hence we will be able to pay off future dividends.
Solutions for Problem 2: Bonds payable will allow
company to pay off debts and hence we have a cash
outflow from the operating activities. If the company is
unable to pay off debts and dividends, then it will seek
other sources of funding such as operating cash flows,
and thus the company will be less liquid in paying off
short-term debt.