As the assistant accountant at Yoo plc you are reviewing the draft financial statements. You have discovered that the net cash flow does not reconcile to the opening and closing cash and cash equivalents balance on the statement of financial position. The indirect method has been used as permitted by IAS 7 Statement of Cash Flows and the draft cash generated from operations is £750,000. After investigation you have discovered the following errors in the draft financial statements. 1. The closing inventory figure in the statement of cash-flows omitted £65,000 relating to inventory stored at a warehouse. 2. The trade payables figure used in the draft statement of cash flows included accrued interest of £85,000. 3. There was a profit on disposal of production equipment of £50,000 included in revenue. All the above items have yet to be taken account of in the financial statements. Required a) Write up the following notes regarding the above three items • Explain why the above errors should be corrected and the etfect that this will have on the statement of cashflows only. Calculate the revised cash generated from operations figure Provide the jounal entries that will be required to correct the errors, including a hriet journal narrative
As the assistant accountant at Yoo plc you are reviewing the draft financial statements. You have discovered that the net cash flow does not reconcile to the opening and closing cash and cash equivalents balance on the statement of financial position. The indirect method has been used as permitted by IAS 7 Statement of Cash Flows and the draft cash generated from operations is £750,000. After investigation you have discovered the following errors in the draft financial statements. 1. The closing inventory figure in the statement of cash-flows omitted £65,000 relating to inventory stored at a warehouse. 2. The trade payables figure used in the draft statement of cash flows included accrued interest of £85,000. 3. There was a profit on disposal of production equipment of £50,000 included in revenue. All the above items have yet to be taken account of in the financial statements. Required a) Write up the following notes regarding the above three items • Explain why the above errors should be corrected and the etfect that this will have on the statement of cashflows only. Calculate the revised cash generated from operations figure Provide the jounal entries that will be required to correct the errors, including a hriet journal narrative
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:As the assistant accountant at Yoo pic you are reviewing the draft financial
statements. You have discovered that the net cash flow does not reconcile to the
opening and closing cash and cash equivalents balance on the statement of financial
position.
The indirect method has been used as permitted by IAS 7 Statement of Cash Flows
and the draft cash generated from operations is £750,000.
After investigation you have discovered the following errors in the draft financial
statements.
1. The closing inventory figure in the statement of cash-flows omitted £65,000
relating to inventory stored at a warehouse.
2. The trade payables figure used in the draft statement of cash flows Included
accrued interest of £85,000.
3. There was a profit on disposal of production equipment of £50,000 included in
revenue.
All the above items have yet to be taken account of in the financial statements.
Required
a) Write up the following notes regarding the above three items
Explain why the above errors should be corrected and the etfect that this
will have on the statement of cashflows only.
• Calculate the revised cash generated from operations figure.
Provide the journal entries that will be required to correct the errors,
including a brief journal narrative.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education