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January 13, 2021 at 2:07 pm #605712
Nandhakrishnan
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Extracts from the financial statements of Deuce Co showed balances as follows:
20X9 20X8
$1 Share capital 300,000 120,000
Share premium 260,000 100,000
A bonus issue of 1 share for every 12 held at the 20X8 year-end occurred during the year
and loan notes of $300,000 were issued at par. Interest of $12,000 was paid during the
year.
What is the net cash inflow from financing activities?
A $480,000
B $605,000
C $617,000
D $640,000

Ans: D

sir, shouldn’t we subtract 10000 (bonus issue) since there was no actual cashflow??
Or should we consider it as an inflow??
can you explain the answer ??
January 14, 2021 at 8:15 am #605766
John Moffat
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No. You are correct that a bonus issue is not a cash flow. However, when we have a bonus issue share capital increases and share premium decreases by the same amount.
So the total of share capital and share premium is not affected by a bonus issue.

Here, the total of the two has increased and so that increase must be due to new shares having been issued for cash.
January 21, 2021 at 7:40 pm #607480
vinushki1234
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On 1 February 20X8 Monye Co owned non-current assets with a carrying amount of $697,680. During the year ended 31 January 20X9 the following occurred:

(1) Land with a carrying amount of $350,000 was revalued to $425,000
(2) An asset with a carrying amount of $40,000 was disposed of for $30,000
(3) Depreciation of $82,400 was charged to the statement of profit or loss

The carrying amount of non-current assets at 31 January 20X9 was $720,490.

What amount should be shown for the purchase of non-current assets in the statement of cash flows for the year ended 31 January 20X9?

Hi Mr. Maffot. Can you please explain to me how to arrive at the answer to this question.
This is a question from the mock exam and i do not have an answer to compare with.
January 22, 2021 at 9:01 am #607511
John Moffat
Keymaster
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The balance brought forward was $697,680.

Revaluing the land will have increased it by $75,000 (425,000 – 350,000).
Disposing of an asset with a carrying value of 40,000 will reduce the balance by $40,000.
Depreciation of 82,400 will reduce the balance by $82,400.

Therefore has there been no purchases the balance would have ended up as $650,280.

The actual balance ended up as $720,490, and therefore the purchases during the year must have been the difference.

Have you watched my free lectures on this?
January 22, 2021 at 11:15 am #607532
vinushki1234
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Thank you Mr. Maffot. I understand now.
January 22, 2021 at 2:38 pm #607557
John Moffat
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You are welcome 🙂
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