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Hi, I have some doubts on the answer of a consolidated cash flow statement on BPP textbook question bank(question 21 Porter). The question gives two years “Trade and other payables” figures of statment of financial position. $ 110 on 20X6 and $ 98 on 20X5. It goes on with additional information relates to the consolidated financial statements. Included in ‘trade and other payables’ is the $ equivalent of an invoice for 102m shillings for some equipment purchased from a foreign supplier. The asset was invoiced on 5 March 20X6, but had not been paid for at the year end, 31 May 20X6. Exchange gains or losses on the transaction have been included in administrative expenses. Relevant exchange rates were as follows:
Shillings to $1
5 March 20X6 6.8
31 May 20X6 6.0The answer gives explantion as follows:
Decrease in trade payables (110 – 98 – 12 – 17 )But I think the $17 should be already included in the year-end figure “$110” and the answer should be increase in trade payables (110 – 98 – 12). But this causes non-reconcile “Cash and cash equivalents at the end of the year” figure in the final cash flow statement with “Cash and cash equivalents” number in STATEMENT OF FINANCIAL POSITION.
Could anyone show me what’s wrong with my answer? Thanks.
First – what’s the $12?
Second – the $17 IS INCLUDED within the £110. But this is not a TRADE payable and is therefore deducted from the $110.
That reduces $110 down to $93 and gives us a decrease in trade payables ….. but I still don’t know what the $12 is
Thanks, sir. Big fan of your lecture. The $12 is related to another part of the question which I didn’t mention. Sorry for the confusion and thanks again for your prompt reply to my question ^ ^
I also suspect the answer may not be entirely correct, for not the reasons above.
The treatment of the revalution surplus moves from $54m to $101m, thus $47m movement
We’re told that the property revaluation in OCI is $58m, so $58m OCl (taken to OCI possibly for reversing earlier reval losses? + $47m gain to reserves = $105m to PPE
but instead, if the $58m appears to be booked between ppe & OCI – no movement to surplus reval reserve – so I am puzzled I can’t reconcile the movement in the reval surplus reserve.
So, per the model answer, reval surplus = $54m + $58m = $112m … But the closing balance is $101m ??? what might I be missunderstanding ?i.e. was expecting;
Dr PPE $105m
Cr OCI Reval Gain $ 58m
Cr Surplus Reserve $ 47m+ Possibly Dep’n adjmts for past reval reversal..
That difference between $112 and $101 looks like a transfer from Revaluation Reserve to Retained Earnings to compensate the Retained Earnings for the surplus / excess depreciation on the revaluation surplus
(Where on this Earth, have you found a copy of Porter? I’ve looked in my BPP 2011 revision kit and in my 2013 Kaplan revision kit and neither has Porter!)
As you may gather from my response, I don’t have access to the question Porter. If my reply has not helped sufficiently, you’ll need to post again in greater detail
Sorry!
Question is within BPP 2013 Study Text; Q.21 on page 554, Model Answer per page 603
I thought of the transfer across reserves but, the question is explicit in detailing the elemental movements for the year on retained earnings in paragraph 5 being TCI + Divs paid., so I ruled that out,
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