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Stephen Widberg.
Stephen Widberg.-
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moniq789
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hi, can you please help how to arrive at the solution given ?
Question is below:
At 1 October 20X0, BK had an accrued interest payable balance of $12,000 in its statement of financial position. During the year ended 30 September 20X1, BK charged interest payable of $41,000 to its statement of profit or loss. Accrued interest payable at 30 September20X1 was $15,000.Included in the interest charged to profit or loss for the year was an unwinding of the discount on a decommissioning provision of $5,000 and lease interest of $3,000. The lease rental is paid in cash annually in arrears.
What is the cash flow in respect of interest paid that will appear in BK’s statement of cash flows for the year ended 30 September 20X1?
In account Interest AP
Dt: Ct
unwinding provision 5; B/f 12
cash to balance [33] charge 41
c/f 15
——- ——-
55 55
provision is not a CF (expense)can you please help how to arrive at the balancing figure [33] and why the CF is 55?
Stephen Widberg
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Not sure it makes any sense to me.
B/d 12
Plus P&L (41-5)
Minus CF
Equals C/d 15Would be my answer.
I’m guessing that this isn’t from a new syllabus exam question.
moniq789
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Thanks Stephen-this is a question from official ACCA site (their application on site student virtual laerning -> SVL and part dedicated for SBR, question no. 5 – > https://studentvirtuallearn.accaglobal.com/course).
Today I realized that there is also an explanation for that but not (yet!) getting it. Any chance you also think there is a typo error and the total is 53 000? Below copy paste from the answer given:
“The unwinding of the discount on the decommissioning provision is an interest expense but not a cash flow. The interest on the lease is a correct charge to profit or loss and it was paid in the period”
Q: What is the cash flow in respect of interest paid that will appear in BK’s statement of cash flows for the year ended 30 September 20X1?
A: The correct answer is: 55000
Stephen Widberg
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Can’t help any more.
But it is correct to say that the unwinding of a discount on a provision is definitely not a cash flow:
Dr P&L Cr Provision
And it is correct to say that lease interest paid is a cash flow (just like any other interest).
moniq789
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