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B.Sc. Finance & Management (ET) | 2d/3rd Semester | Lecture: Financial Reporting 2 0. Preparation of Cash Flow Statement (direct versus indirect method) inancial information for Tremendous AG for the year ended December 31, 2016, follows: TREMENDOUS AG

B.Sc. Finance & Management (ET) | 2d/3rd Semester | Lecture: Financial Reporting 2 0. Preparation of Cash Flow Statement (direct versus indirect method) inancial information for Tremendous AG for the year ended December 31, 2016, follows: TREMENDOUS AG

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Cash flow statement/ direct, indirect methods.
B.Sc. Finance & Management (ET) | 2nd / 3rd Semester | Lecture: Financial Reporting 2 20. Preparation of Cash Flow Statement (direct versus indirect method) Financial information for Tremendous AG for the year ended December 31, 2016, follows: TREMENDOUSS AG BALANCE SHEET in € as of December 31, 2015, and 2016 2016 2015 Assets Intangible assets Property, plant, and equipment Due from associates Inventory Trade receivables Cash and cash equivalents Total assets 2,250 24,750 1,500 10,500 28,500 3,000 7,500 4,500 55,500 28,500 2,250 3,750 1,500 63,000 Shareholders' equity Share capital Retained earnings Total shareholders' equity Liabilities Deferred taxes payable Income taxes payable Accounts payable Total liabilities Total liabilities and shareholders' equity 9,750 30,750 40,500 9,750 30.000 39.750 4,500 3,000 7.500 15,000 55,500 3,000 1.500 18,750 23,250 63,000 TREMENDOUS AG STATE- MENT OF INCOME For the Year Ended December 31, 2016 Sales Cost Gross operating income Administrative and selling expenses €45,000 (15.000) 30,000 (3,000) (3,000) (3,000) (750) 4,500 24,750 (6,000) €18,750 i sales Interest expenses Depreciation of property, plant, and equip- Amortization of intangible asset Investment income Net income before taxation Taxes on income Net income Additional Information This additional information is relevant to the preparation of the statement of cash flows: 1. All sales made by Tremendous AG ("company") are credit sales. All purchases are on account. 2. Interest expense for the year 2016 was €3,000, which was fully paid during the year. 3. The company pays salaries and other employee dues before the end of each month. All administration and selling expenses incurred were paid before December 31, 2016. 4. Investment income comprised dividend income from investments in shares of blue chip companies. This was received before December 31, 2016. 5. Equipment with a net book value of €11,250 and original cost of €15,750 was sold for €11,250. 6. The company decdared and paid dividends of €18,000 to its shareholders during 2016. 7. Income tax expense for the year 2016 was €6,000, against which the company paid €3,000 during 2016 as an estimate. Required Using all the given financial information for Tremendous AG, prepare the statement of cash flows according to the requirements of IAS 7 under both the direct and the indirect methods. ISM – International School of Management | Department of Financial Reporting & Law | Prof. Dr. Gerrit Lietz
Transcribed Image Text:B.Sc. Finance & Management (ET) | 2nd / 3rd Semester | Lecture: Financial Reporting 2 20. Preparation of Cash Flow Statement (direct versus indirect method) Financial information for Tremendous AG for the year ended December 31, 2016, follows: TREMENDOUSS AG BALANCE SHEET in € as of December 31, 2015, and 2016 2016 2015 Assets Intangible assets Property, plant, and equipment Due from associates Inventory Trade receivables Cash and cash equivalents Total assets 2,250 24,750 1,500 10,500 28,500 3,000 7,500 4,500 55,500 28,500 2,250 3,750 1,500 63,000 Shareholders' equity Share capital Retained earnings Total shareholders' equity Liabilities Deferred taxes payable Income taxes payable Accounts payable Total liabilities Total liabilities and shareholders' equity 9,750 30,750 40,500 9,750 30.000 39.750 4,500 3,000 7.500 15,000 55,500 3,000 1.500 18,750 23,250 63,000 TREMENDOUS AG STATE- MENT OF INCOME For the Year Ended December 31, 2016 Sales Cost Gross operating income Administrative and selling expenses €45,000 (15.000) 30,000 (3,000) (3,000) (3,000) (750) 4,500 24,750 (6,000) €18,750 i sales Interest expenses Depreciation of property, plant, and equip- Amortization of intangible asset Investment income Net income before taxation Taxes on income Net income Additional Information This additional information is relevant to the preparation of the statement of cash flows: 1. All sales made by Tremendous AG ("company") are credit sales. All purchases are on account. 2. Interest expense for the year 2016 was €3,000, which was fully paid during the year. 3. The company pays salaries and other employee dues before the end of each month. All administration and selling expenses incurred were paid before December 31, 2016. 4. Investment income comprised dividend income from investments in shares of blue chip companies. This was received before December 31, 2016. 5. Equipment with a net book value of €11,250 and original cost of €15,750 was sold for €11,250. 6. The company decdared and paid dividends of €18,000 to its shareholders during 2016. 7. Income tax expense for the year 2016 was €6,000, against which the company paid €3,000 during 2016 as an estimate. Required Using all the given financial information for Tremendous AG, prepare the statement of cash flows according to the requirements of IAS 7 under both the direct and the indirect methods. ISM – International School of Management | Department of Financial Reporting & Law | Prof. Dr. Gerrit Lietz
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