A-AS Level (CIE) Business Studies Paper-2: Specimen Questions with Answers 43 - 45 of 52

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Passage

Case Study-4

Meta company is consistently using indirect method for preparing its statement of cash flows. The comparative balance sheet and some additional information of the company are given below:

Balance Sheets

Additional Information

  • Net income for the year: .
  • Cash dividend declared and paid during the year: .
  • Depreciation expenses for the year:
  • Sold marketable securities for ; the cost was .
  • Acquired plant assets for . paid in cash and a mortgage note payable was issued for the balance.

Question 43 (1 of 5 Based on Passage)

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Short Answer▾

Show the effect on balance sheet for the year ending 2013.

Explanation

Balance Sheet Effects

Question 44 (2 of 5 Based on Passage)

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Short Answer▾

Why specific disclosure of cash flow from financing activities important while preparing cash flow statement?

Explanation

Cash flow from financing activities provides important information about the financial health of an organization about its plans. Positive cash flows show intentions of the organizations about the expansion and growth in future. On the other hand, negative cash flows from financing activities shows a sign of liquidity position of company if repayment of debts is made. Negative cash flows also. shows the dividend policy of the organization.

Question 45 (3 of 5 Based on Passage)

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Short Answer▾

Calculate cash flow from operating activities.

Explanation

Cash Flows from Operating Activities

Cash Flows from Operating Activities
Net income$ 50,000
+ Depreciation Expense$ 120,000
+ Increase in inventory$ 10,000
+ Increase in accounts payable$ 20,000
-increase in accounts receivable ($ 20,000)
-Decrease in accrued expenses payable ($ 30,000)
-Gain on saleable marketable securities ($ 40,000)$ 60,000
Net cash provided by operating activities$ 560,000

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