CIE Accounting Paper-2: Specimen Questions 45 - 47 of 103

Passage

Turbo & Co. forfeited 100 equity shares of £100 each held by Mr. Andy on 20th December 2011, for nonpayment of first call of £20 per share and final call of £30 per share. These shares were reissued to Mr. Candy on 31st December 2011, at a discount of £35 per share.

Question number: 45 (5 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

How can Turbo & Co. reissue the forfeited shares?

Explanation

Reissue of share means the resale of shares and not the re-allotment of shares. The shares which have been forfeited for nonpayment of subsequent call money can be reissued. The reissue of shares can either be at par or premium or at a discount. However the discount should not exceed the amount available in the share forfeiture account.

Passage

Daffy Ltd had a profit of £500000, after charging depreciation of £100000 on assets and transferring an amount of £150000 to general reserve. The Goodwill amortized was £35000, and a profit was gained on the sale of machinery amounting to £15000. Other changes in current assets and current liabilities was as follows:

(i) Increase in trade receivables £15000

(ii) Increase in trade payables £30000

(iii) Increase in prepaid expenses £1000

(iv) Decrease in outstanding expenses £10000

Question number: 46 (1 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

How much cash flow does Daffy Ltd have from Operating activities?

Explanation

The net cash from operating activities of Daffy Ltd is £774000

Statement showing cash flows from operating activities

Calculate Amount of the table

PARTICULARS

AMOUNT

AMOUNT

Net profit before Taxation

650000

Adjustments of non cash & non operating expenses:

Add: Depreciation

100000

Add: Goodwill

35000

135000

785000

Less: Profit on sale of machinery

-15000

770000

Adjustments for working capital changes:

Less: Increase in trade receivables

15000

Less: Increase in prepaid expenses

1000

Less: Decrease in outstanding expenses

10000

26000

744000

Add: Increase in trade Payables

30000

Cash flow from operating activities

774000

Question number: 47 (2 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What is the objective of preparing a cash flow statement?

Explanation

A cash flow statement provides information about the cash inflows and outflows of cash and its equivalent. The basic objective of cash flow statement is to provide the enterprise with information regarding the inflows and outflows of cash under the various heads such as: Operating activities; Financing activities and investing activities. It enables the users to evaluate the ability of the enterprise to generate cash and its equivalents.

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