Win Win Top (WWT) experienced a slight drop in the cash balance. You, as the accountant...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Win Win Top ("WWT") experienced a slight drop in the cash balance. You, as the accountant of WWT, are requested to analyze the impacts of cash flows for the year ended 30 June 2021 with the following financial information of WWT: Statement of profit or loss and other comprehensive income for the year ended 30 June 2021 Revenue Cost of sales HK$ 6,400,000 (3,340,000) Gross profit Gain on disposal of equipment Gain on fair value change of long-term investments 3,060,000 400,000 20,000 Selling and administrative expenses Profit before tax Income tax expense Profit for the year (2,998,000) 482,000 (82,000) 400,000 Statement of financial position As at 30 June 2021 HK$ As at 30 June 2020 HK$ 80,400,000 26,020,000 77,600,000 26,000,000 Non-current assets Property, plant and equipment, net Long-term investments Current assets Inventories Trade receivables Cash Total assets 1,218,000 1,448,000 638,000 788,000 18,276,000 20,038,000 126,552,000 125,874,000 Equities Share capital 20,800,000 Retained earnings 104,820,000 20,000,000 104,600,000 Total equities 125,620,000 124,600,000 Current liabilities Trade payables Current tax payable Total equities and liabilities 846,000 1,160,000 86,000 126,552,000 114,000 125,874,000 Additional information: (1) During the year ended 30 June 2021, WWT disposed of equipment items with a cost of HK$14,000,000 and accumulated depreciation of HK$12,000,000. Further, WWT acquired equipment items for its new division and settled all the purchases in cash. WWT recorded depreciation of HK$1,600,000 which was included in selling and administrative expenses. WWT measures all its equipment items using the cost model in accordance with IFRS 16 Property, Plant and Equipment. (2) During the year ended 30 June 2021. WWT did not purchase additional long-term investments. In accordance with IFRS 9 Financial Instruments, WWT measures all its long-term investments at fair value through profit or loss (FVTPL). WWT did not receive any dividends from such investments during the year. (3) WWT did not have any borrowings throughout the years. Required: (a) Explain the term "cash equivalents" in accordance with IFRS 7 Statement of Cash Flows. (4 marks) (b) In the preparation of the statement of cash flows of WWT for the year ended 30 June 2021 using the indirect method, (i) identify (a) the non-cash items (items other than changes in operating assets and liabilities) to be adjusted to net profit and state the effects of such adjustments on net profit; and (b) the working capital items and state the effects of the items on cash flows from operating activities. (6 marks) (ii) determine the following amounts and state how each item should be presented and the cash flows effects in the statement of cash flows: 1. Disposal of equipment items; 2. Purchase of equipment items; 3. Issue of new shares; 4. Distribution of dividends; and 5. Tax payment. (15 marks) Write the answers of (a) and (b)(i) in the space provided below (indicate the question numbers clearly) Please write your answer of (b)(ii) in the space provided below Disposal of equipment Purchase of equipment Issue of new shares Distribution of dividends Tax payment Amount with calculations Nature of Activities Increase or Decrease Cash Flows Win Win Top ("WWT") experienced a slight drop in the cash balance. You, as the accountant of WWT, are requested to analyze the impacts of cash flows for the year ended 30 June 2021 with the following financial information of WWT: Statement of profit or loss and other comprehensive income for the year ended 30 June 2021 Revenue Cost of sales HK$ 6,400,000 (3,340,000) Gross profit Gain on disposal of equipment Gain on fair value change of long-term investments 3,060,000 400,000 20,000 Selling and administrative expenses Profit before tax Income tax expense Profit for the year (2,998,000) 482,000 (82,000) 400,000 Statement of financial position As at 30 June 2021 HK$ As at 30 June 2020 HK$ 80,400,000 26,020,000 77,600,000 26,000,000 Non-current assets Property, plant and equipment, net Long-term investments Current assets Inventories Trade receivables Cash Total assets 1,218,000 1,448,000 638,000 788,000 18,276,000 20,038,000 126,552,000 125,874,000 Equities Share capital 20,800,000 Retained earnings 104,820,000 20,000,000 104,600,000 Total equities 125,620,000 124,600,000 Current liabilities Trade payables Current tax payable Total equities and liabilities 846,000 1,160,000 86,000 126,552,000 114,000 125,874,000 Additional information: (1) During the year ended 30 June 2021, WWT disposed of equipment items with a cost of HK$14,000,000 and accumulated depreciation of HK$12,000,000. Further, WWT acquired equipment items for its new division and settled all the purchases in cash. WWT recorded depreciation of HK$1,600,000 which was included in selling and administrative expenses. WWT measures all its equipment items using the cost model in accordance with IFRS 16 Property, Plant and Equipment. (2) During the year ended 30 June 2021. WWT did not purchase additional long-term investments. In accordance with IFRS 9 Financial Instruments, WWT measures all its long-term investments at fair value through profit or loss (FVTPL). WWT did not receive any dividends from such investments during the year. (3) WWT did not have any borrowings throughout the years. Required: (a) Explain the term "cash equivalents" in accordance with IFRS 7 Statement of Cash Flows. (4 marks) (b) In the preparation of the statement of cash flows of WWT for the year ended 30 June 2021 using the indirect method, (i) identify (a) the non-cash items (items other than changes in operating assets and liabilities) to be adjusted to net profit and state the effects of such adjustments on net profit; and (b) the working capital items and state the effects of the items on cash flows from operating activities. (6 marks) (ii) determine the following amounts and state how each item should be presented and the cash flows effects in the statement of cash flows: 1. Disposal of equipment items; 2. Purchase of equipment items; 3. Issue of new shares; 4. Distribution of dividends; and 5. Tax payment. (15 marks) Write the answers of (a) and (b)(i) in the space provided below (indicate the question numbers clearly) Please write your answer of (b)(ii) in the space provided below Disposal of equipment Purchase of equipment Issue of new shares Distribution of dividends Tax payment Amount with calculations Nature of Activities Increase or Decrease Cash Flows
Expert Answer:
Answer rating: 100% (QA)
a Cash equivalents refers to shortterm highly liquid investments that are readily convertible into known amounts of cash and have original maturities ... View the full answer
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
Posted Date:
Students also viewed these accounting questions
-
Old Office Building Karas Investments owns a small office building in Windhoek, from which the company operates. The Windhoek office was purchased on 1 March 2019. Karas Investments decided to move...
-
A disadvantage of many profitsharing remuneration plans is that: Group of answer choices They align shareholders' and managers' objectives. They do not incentivize management to change their...
-
What is the competitive status of the main EU economies in terms of labor productivity and investment spending? Based on your answer, what is your overall evaluation of this status?
-
(a) state the domain of the function, (b) identify all intercepts, (c) find any vertical or slant asymptotes, and (d) plot additional solution points as needed to sketch the graph of the rational...
-
Assume the following exceptions to prescribed control procedures over purchases and cash disbursements transactions occurred in the Theor Company: 1. An unauthorized purchase requisition was...
-
Teresa Ramirez and Lenny Traylor are examining the following statement of cash flows for Pacific Clothing Stores first year of operations. Teresa claims that Pacifics statement of cash flows is an...
-
1. As seen by an observer on Earth, two stars are separated by an angle of 0.0005. What is the minimum diameter of a telescope required for an Earth astronomer to see two separate stars? (Assume a...
-
1 4 m 8 m For the given stadium roof truss, the magnitude of load in the member GI (in kN) will be 2m M + 2 m 1 0.8 KN D 1.9 KN B 1.9 kN 0.95 KN 3m / 3.5 m K 3.5m L
-
What does investment risk mean?
-
What security provides a good estimate of the short-term nominal risk-free rate?
-
A person who makes a will. a. benefi ciary b. bequest c. codicil d. decedent e. devise f. executor g. holographic will h. inter vivos i. intestate j. personal representative k. residuary l. settlor...
-
The person named in a will to administer the estate. a. benefi ciary b. bequest c. codicil d. decedent e. devise f. executor g. holographic will h. inter vivos i. intestate j. personal representative...
-
Differentiate between interest rate risk and reinvestment rate risk.
-
Consider the flow of an incompressible, Newtonian fluid between two long, horizontal parallel plates having infinite width as illustrated below. The bottom plate is fixed, the top plate moves to the...
-
Nike manufactures shoes and sportswear. How has the Internet changed the way this company communicates with its suppliers and retail customers?
-
Why is rejection of the null hypothesis using a t test a more specific statement than rejection of the null hypothesis using a traditional nonparametric test? I frequently ask you to use SPSS or R to...
-
Define the terms generalized impedance and admittance of a system.
-
One of the arguments in favor of distribution-free tests is that they are more appropriate for ordinal scale data. (This issue was addressed earlier in the book in a different context.) Give a reason...
Study smarter with the SolutionInn App