Comments

  1. avatar says

    Hi all , another wonderful lecture, thanks Mike.

    could someone please help me with a few issues as i seem to understand this lecture but there are two things i cant get around.
    1. how do we work out the $32 increase in receivables? am i wrong to assume it should have been $584 – $492 = $92
    2. in the answer at the back of the text, the cash &equivalents c/f were worked out as 17+32-60 = $(11). the bank liability of $60 was included.

    please help
    many thanks

    • Avatar of MikeLittle says

      Hi Frank, thanks for your appreciative comments. The answer in the back of the notes shows the increase in receivables as (92). That’s correct so far as I am concerned :-)

      The cash and equivalents figure HAS included as a deduction the 60 overdraft at the bank at the end of the year netted off the figure of 17 + 32. So, yes, I ALWAYS include the overdrawn position as a cash and equivalent amount although, in practice, consideration needs to be given to the nature of the overdraft – is it long term financing or is it a short term element of cash and equivalents. If it’s long term, then it would probably be more correct to include the amount in the “Financing” section of the Statement of Cash Flows rather than as a Cash and Equivalent amount

  2. avatar says

    hi all. thanks Mike, nice lecture as i seem to understand whats happening. I’ve got one question Mike,
    how do you work out the increase in receivables, am i wrong to assume its $ (584 – 492) = $92
    also in your answer at the back of the text, cash equivalents c/f are worked out as 17+32-60 = $(11) the bank liability is included in the working. please advise as i can’t get around this. thanks for the effort.

  3. avatar says

    Hi,

    Can someone help me with the treatment of interest under operating cash flow please?

    In Kaplan exam kit some of the answers do not add interest expense and then deduct it but instead they just deduct it, so my question is when do I add and deduct and when do I simply deduct it? Is there something in the question that need to watch out for?

    Thank you.

    • Avatar of MikeLittle says

      The start point is pbt. If interest has NOT been deducted in arriving, but the start given is pbit, then we need to deduct interest to arrive at pbt. That’s the top figure in the cash flow.

      One of the first things we then do is add the interest back – the same figure we have just deducted.

      Then we need to calculate the amount of interest actually paid and deduct that as Cash paid in the operating activities of the Statement of Cash Flows

      Does that clear it up for you?

      • avatar says

        Thank you very much Mike. It really helped, I’ve compared few question and answers they now make sense. Thank you again.

    • Avatar of MikeLittle says

      @valenyap86, In the Statement of Financial Position, per the question, in the Equity section, third line, you’ll see the words “Revaluation surplus”. If you move your eyes to the right along that line, you come to the figures “150″ and “40″

      Now, by deducting “40″ from “150″, you arrive at “110″

      Does that answer it for you?

  4. avatar says

    hello, good example but I’m confused about one thing…in arriving at the figure of (239) for purchase of investments, why is the 32 taken away from to get 364…..isn’t that 32 related to the receivables?

    • Avatar of MikeLittle says

      @alextrunghuynh, Ok … what’s the problem? The calculation to arrive at 75,000 or the fact that the debit entry has gone to Share Premium? ( The credit entry has gone to increase the Share Capital from 300,000 to 375,000 )

      If the problem is the calculation of 75,000 that’s easily sorted! How many shares were in existence at the date just before the bonus issue? Last year’s shares brought forward = 300,000. A “1 for 4″ bonus issue means that, for every 4 shares you previously held, the company will give you 1 more share. So, for 300,000 shares there will be an additional 75,000 shares issued as bonus shares.

      If the problem is “Why the Share Premium Account” it’s because there are only four allowable uses of the Share Premium, and the most valuable one – where you can use up the greatest amount of Share Premium. So, we’ve calculated 75,000 and I’ve explained WHY the Share Premium Account. The double entry to record the bonus is therefore is Debit Share Premium Account and Credit Share Capital Account. The entry will be recorded in the Statement of Changes in Equity

      Better?

  5. avatar says

    maybe I am having blonde moments. I accessed the lecture where can I get the questions, ZETA. I have been doing the revisions based on ACCA past papers but on this one I do not KNOW where the ZETA question is , please help

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