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August 11, 2020 at 1:32 pm
Could you please explain me why is that 3rd statement is the only correct statement in question 07. 2nd statement is also correct isn’t it?. We don’t feature rights issue in cash flow statement because it is not a cash flow.
July 23, 2020 at 12:31 pm
Hi Tutor, Can you please help me with Question 1?
Cash(bal) 2100. B/f 3800 C/f 4600. Interim 2900
There is no information given in the question as opening balance along with interest is paid. Kindly provide clearly how the answer have been prepared for Question 1
July 23, 2020 at 1:03 pm
This is a dividend liability. Pear will not be paying an interim dividend for this year before it has paid the final dividend liability from last year
So this year’s payment for the Cash Flow will be $3,800 liability brought forward + $2,900 interim dividend for this year = $6,700
July 27, 2020 at 7:37 am
July 12, 2020 at 3:18 pm
can anyone help me with question 2 ? please
July 23, 2020 at 1:18 pm
There were $160,000 worth of 50 cent shares brought forward from last year = 320,000 shares brought forward
There was a new issue of bonus shares on the basis of 1 for 8 capitalising the General Reserve, so now there are 360,000 50 cent shares in issue and no cash has changed hands on this issue
Then there’s a 1 for 2 rights issue at 90 cents per share so a further 180,000 shares are issue bringing in cash of 180,000 x 90 cents = $162,000
The Share Premium Account will be credited with the premium on the new issue (180,000 x (90 cents issue price – 50 cents nominal value) = 180,000 x 40 cents = $72,000
What I don’t understand is why this is in Cash Flow from Operating Activities! I think it should be in Cash Flow from Financing Activities
January 29, 2020 at 1:01 pm
hi, please explain dividend paid in peace plc question.
i thought it will be $2100
opening 3800 interm 2900 Paid (Balance) (2100) closing 4600
March 24, 2020 at 10:06 am
No, Opening balance i.e. last year liability should also have been paid. therefore, 3800+Interim dividend  = 6700 should appear as Dividend paid in Financing Activities.
December 4, 2019 at 9:39 am
Hi i can get the explantions for the theory questions from 4- onwards
December 3, 2019 at 12:13 pm
In question 2, can you clarify why the rights issue is not included in the calculation and why this does not affect cash flows? Is the exercise and market price there to throw you?
Best wishes, Samantha
March 24, 2020 at 10:10 am
It is considered in calculation. Exercise and market price before issue , I think is useful for EPS calculations. No relevance here. Accordingly, 180,000 Right Shares * $0.90 = $162,000 is bifurcated to $0.50 Face value and $0.40 Premium received. Hence, Total proceeds of $162,000 will be included in Cash Flow from Financing Activities.
May 25, 2019 at 5:00 pm
Question 2 – (270-(160+20)) * How do you get 20?
May 26, 2019 at 6:09 am
“On 31 July, 2014 a bonus issue of 1 for 8 was made financed by capitalising some of the General Reserve”
At the start of 2014 there were 320,000 shares of 50 cents each (= $160,000)
For every 8 shares already held, Pere gave as a bonus 1 extra share
So 40,000 shares were issued as bonus and, at 50 cents nominal value per share, that gives us $20,000 worth of bonus issue shares
If you’re happy with this concept now, it’s probably easier in future simply to divide $160,000 by 8 to get the value of the 1 for 8 bonus issued shares
May 27, 2019 at 5:36 pm
Thank you very much Tutor
May 16, 2019 at 7:27 pm
Q2. How was the $20K value calculated, so far I understand that there was a bonus issue of 40 shares and a rights issue of 180 shares, correct me if I am wrong but how do I get the dollar value of $20K
May 16, 2019 at 7:18 pm
How was the $20K value calculated, so far I understand that there was a bonus issue of 40 shares and a rights issue of 180 shares, correct me if I am wrong but how do I get the dollar value of $20K
May 26, 2019 at 6:10 am
See my reply to Boianna above
February 17, 2019 at 4:51 am
Please refer to question no 8.
Operating profit should not include profit from sale of non current assets. So no need to subtract it from operating profit while preparing a CF Statement. Had the question sought for addition/deduction from “Net profit” instead of “operating profit”, then it would be fine to subtract the profit on sale.
Am I right or could you please explain otherwise?
February 17, 2019 at 10:19 am
When the sale was recorded the profit on sale will have been included in the operating profit in the statement of profit or loss. It is a non-cash item and therefore it is adjusted accordingly. The question is asking for the cash flow from operating activities, and has no relevance to net profit.
February 17, 2019 at 12:02 pm
Thanks for your reply.
I did some more study and now I agree with you. Operating profit DOES INCLUDE gain/loss arising from sale of non current assets. I have made a rationale of my own – since depraciation is charged on operating segment in the IS, and it is overcharged/undercharged depreciation that gives rise to gain/loss on sale of that assets, hence, gain/loss should be included in the operating profit.
Now, since it is a non cash item, it should be adjusted from the operating profit while preparing CF Statement.
Thank you P2-D2 again. 🙂
October 13, 2018 at 4:29 am
Good day sir thanks for the lectures they are really helpful. In question8. Why do we subtract the profit on the sale instead of adding it?
Also I thought the amount that appears on the statement of cash flows is supposed to be the proceeds amount (proceeds=profit/loss-carrying value), not the profit/loss on the sale (as seen in the last lecture example on statement of cash flows) that’s why I left out that profit in the calculation. Please explain further.
February 17, 2019 at 10:21 am
Glad that you’ve enjoyed the lectures.
The profit on sale has increased the operating profit but it has not increased the cash, so it is deducted to get back to a cash figure.
August 4, 2018 at 10:19 am
Shouldn’t the question on Pere plc be for financing activities rather than operating?
February 17, 2019 at 10:22 am
Good spot! I’ll get it changed. Thanks
August 2, 2018 at 9:24 am
hello, for question 2, after bonus share issued, why the share premium account doesn’t change? i think should be decreased to 120-20=100
August 3, 2018 at 12:50 pm
The share premium account would normally decrease but it specifically states in the question that the bonus issue used the general reserve and not the share premium account.
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