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- This topic has 3 replies, 2 voices, and was last updated 2 years ago by
John Moffat.
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- May 12, 2021 at 12:08 pm #620395
Dear Sir John.
Given below is the question on cash flow.
Big Time Co had the following transactions during the year.
· Purchases from suppliers were $18,500, of which $2,550 was unpaid at the year end. Brought forward payables were $1,000.
· Wages and salaries amounted to $9,500, of which $750 was unpaid at the year end. The financial statements for the previous year showed an accrual for wages and salaries of $1,500.
· Interest of $2,100 on a long term loan was paid in the year.
· Sales revenue was $33,400, including $900 receivables at the year end. Brought forward receivables were $400.
· Interest on cash deposits at the bank amounted to $175.
Using the direct method, what is Big Time Co’s cash flow from operating activities?As per my calculation after considering accruals & other adjustment.
Sales -> 33400+400-900 = 32,900
wages paid -> 9500-750+1500 = (10,250)
purchase (18,500-2550+1000)
interest paid -> (2100)However the interest received should be part of investing so should be excluded from operating activities. thereby I get the answer of 3600. which is wrong. I am stuck on this for a while can you please help me with this. Thank you.!
May 12, 2021 at 4:00 pm #620408I do not know why you say that your answer is wrong.
The correct answer is $3,600 !
(I assume that you found this question in the BPP Revision Kit, and their answer also shows the correct answer as being $3,600!!)
January 11, 2022 at 9:42 am #645641thank you
January 12, 2022 at 8:23 am #645717You are welcome.
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