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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 000Where 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.
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