I don't seem to get the right answer for this. Can you please assist?
J and K Company has had the following changes in its share capital and long-term liabilities during their last financial year:
A rights issue of £750 000
The repayment of half the £1m 7% loan stock
A bonus issue of £600 000
Issue of £1.25m 5% debentures
What INFLOW would appear under the financing activities heading in J and K’s IAS 7 Statement of Cash Flows, adopting the indirect method?
A. £900 000
B. £1 000 000
C. £1 500 000
D. £2 100 000
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Cash Inflow
3y ago#1Where did you find this question, because it is a little strange in two respects?
Partly because it is irrelevant whether they are adopting the direct or the indirect method.
Also, it is strange to ask what inflow would appear - they must actually mean the net inflow.
There is a net inflow of 750,000 + 1,250,000 - 500,000 = 1,500,000.
This is from CIPFA Financial Accounting mock exam.
Thanks for the answer. I didn't get that the repayment of the loan means half the initial loan. I thought half the installment . This is why I couldn't get it right.
3y ago#3You are welcome, but there is no mention of it being repaid in instalments (they will have been paying interest, but this is not an instalment and will not appear under the heading of 'financing activities' anyway).
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