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Hi Sir,
I am wondering how the accounting/business equations are applied to solve this question? Can you help me with that?A business’s bank balance Increased by $750,000 during Its last financial year. During the
some period, It Issued shares of $1 million and repaid a loan note of $750,000. It purchased
non-current assets for $200,000 and charged depreciation of $100,000. Working capital
(other than the bank balance) Increased by $575,000.
What was Its profit for the year?
$1,175,000
$1,275,000
$1,326,000
$1,375,000Thank Sir
This question is testing Statement of Cash Flows, not the accounting equations.
We know the increase in the bank balance and we know the cash flows arising due to financing activities and investing activities. So we can work backwards to arrive at the cash flow from operating activities.
We know the increase in working capital and the depreciation, so we can work backwards from the cash flow from operating activities in order to calculate the profit for the year.
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