EXERCISES LESSON 7 CASH FLOW STATEMENT

Loading...

DEPARTAMENTO DE CONTABILIDAD Y ECONOMÍA FINANCIERA

ESCUELA UNIVERSITARIA DE ESTUDIOS EMPRESARIALES

FINANCIAL ACCOUNTING (DIPLOMATURA EN CIENCIAS EMPRESARIALES, 2º CURSO, GRUPO 5)

2008-2009

EXERCISES LESSON 7 CASH FLOW STATEMENT

1

CASH FLOW STATEMENT: LESSON 7

EXERCISE 1 LESSON 7 Company ABC, created at the beginning of 2007, had at the beginning of 2008 a working capital composed exclusively by cash. The cash account had a balance of 4.000 €. During 2008 the operations of the company have been the following: • • •

• •

The services rendered during the year amount 600 € received in cash. Personnel expenses and other operating expenses of 400 € have been paid in cash during the year. The fixed assets depreciation expense for the year amounts 110 €. The 1st of October the company obtained a long-term loan of 4.000 € from the CHASE MANHATTAN BANK, which will be paid back at the end of 2012. The annual interest rate is 3% on the total amount, payable at the beginning of each quarter. At the end of the year the company has bought new fixed assets with a cost of 12.000 €: 8.000 paid in cash and the other 4.000 € will be paid in 24 months. The tax rate is 30%.

REQUIRED: Prepare the Cash Flow Statement for year 2008. EXERCISE 2 LESSON 7 Company ABC, created at the beginning of 2007, published the following financial statements at the end of 2008: ASSETS

2008

2007

A) NON-CURRENT ASSETS II. Tangible fixed assets.

LIABILITIES

2008

2007

A) EQUITY 21,890

10,000

A-1) Shareholders' equity.

B) CURRENT ASSETS

I. Capital.

14,000

14,000

III. Trade accounts receivables and other r.

VII. Income for the year.

42

0

2. Long-term debt payable to credit institutions.

4,000

0

4,000

0

30

0

4. Salary payable

100

0

5. Liability for current tax.

18

0

TOTAL LIABILITIES

22,190

14,000

1. Trade accounts receivables for sale and services.

348

0

B) NON-CURRENT LIABILITIES

6. Other receivables from Public Authorities

1,824

0

II. Long-term debt.

VII. Cash and cash equivalents. 1. Cash.

(1,872)

4,000

5. Other financial liabilities

TOTAL ASSETS

22,190

14,000

C) CURRENT LIABILITIES III. Short-term debt. 2. Short-term debt payable to credit institutions. V. Trade accounts payables and other p.

2

2008 A) CONTINUING OPERATIONS 1. Net turnover.

600

6. Personnel expenses.

(400)

8. Fixed assets depreciation expense.

(110)

A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11)

90

13. Financial expenses.

(30)

A.2) FINANCIAL INCOME (12+13+14+15+16)

(30)

A.3) INCOME BEFORE TAXES (A.1+A.2)

60

17. Income tax.

(18)

A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17)

42

A.5) INCOME FOR THE YEAR

42

During 2008 the operations of the company have been the following: • The services rendered during the year amount 600 € (50% of these revenues have been collected in cash during 2008). Personnel expenses were 400 € (75% of these expenses have been paid in cash during 2008). • The fixed assets depreciation expense for the year amounts 110 €. • The 1st of October the company obtained a long-term loan of 4.000 € from the CHASE MANHATTAN BANK, which will be paid back at the end of 2012. The annual interest rate is 3% on the total amount, payable at the end of each semester. • At the end of the year the company has bought new fixed assets with a cost of 12.000 €: 8.000 and the V.A.T. paid in cash and the other 4.000 € will be paid in 24 months. • The tax rate is 30%, payable in June of the next year. • V.A.T. is 16%. REQUIRED: Prepare the Cash Flow Statement for year 2008. SOLUTION JOURNAL 2008 348 348 400

Cash Accounts receivables Wages and salaries

110 4000

Tangible expense Cash

30 12000 1920

Interest expense Tangible fixed assets V.A.T. paid

to to

600 510

Services rendered Operating income

to to

30 90

Financial income Operating income

to to

18

Income tax expense

to

fixed

assets

to to depreciation to to

Services rendered V.A.T. collected Cash Salary payable Accumulated depreciation of tangible fixed assets Long-term loan payable to financial institutions Interest payable Cash Long-term debt with suppliers of fixed assets

600 96 300 100 110

Operating income Wages and salaries Tangible fixed assets depreciation expense Interest expense Financial income Income before taxes Payable to public authorities

600 400 110

4000 30 9920 4000

30 30 60 18

3

60

Income before taxes

96 1824

V.A.T. collected Receivable from (V.A.T.)

to to public

(Income tax) Income tax expense INCOME FOR THE YEAR V.A.T. paid

18 42 1920

authorities

A) CASH FLOWS FROM OPERATING ACTIVITIES 1. Income before taxes

200X 60

2. Adjustments to income a) Depreciation of fixed assets (+).

110

b) Value corrections for impairment (+/-). c) Change in provisions (+/-). d) Transfer of grants (-). e) Income from disposal of non-current assets (+/-). f) Income from disposal of financial instruments (+/-). g) Financial revenues (-). h) Financial expenses (+).

30

i) Exchange differences (+/-). j) Change in fair value of financial instruments (+/-). k) Other revenues and expenses (-/+). 3. Changes in working capital a) Inventory (+/-). b) Accounts receivables and other receivables (+/-).

-2172

c) Other current assets (+/-). d) Accounts payables and other payables (+/-).

100

e) Other current liabilities (+/-). f) Other non-current assets and liabilities (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-). b) Cash receipts of dividends (+). c) Cash receipts of interests (+). d) Cash receipts (payments) for income taxes (+/-). e) Other cash payments (receipts) (-/+) 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4)

-1872

B) CASH FLOWS FROM INVESTMENT ACTIVITIES 6. Cash payments for investments (-) a) Subsidiaries and associated companies. b) Intangible assets. c) Tangible fixed assets.

-8000

d) Investment property. e) Other financial assets. f) Non-current assets held for sale. g) Other assets. 7. Cash receipts from disinvestments (+) a) Subsidiaries and associated companies. b) Intangible assets.

4

c) Tangible fixed assets. d) Investment property. e) Other financial assets. f) Non-current assets held for sale. g) Other assets. 8. Cash flows from investment activities (7-6)

-8000

C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). b) Amortization of equity instruments (-). c) Acquisition of the own equity instruments (-). d) Disposal of the own equity instruments (+). e) Grants, donations and legacies received (+). 10. Cash receipts and payments for debt instruments a) Issuing of 1. Debentures and other negotiable securities (+). 2. Long term debt payable to credit institutions (+).

4000

3. Long term debt payable to subsidiaries and associated companies (+). 4. Other debt (+). b) Refunds and amortization of 1. Debentures and other negotiable securities (-). 2. Long term debt payable to credit institutions (-). 3. Long term debt payable to subsidiaries and associated companies (-). 4. Other debt (-). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). b) Remuneration of other equity instruments (-). 12. Cash flows from financing activities (+/-9+/-10-11)

4000

D) Effect of changes in exchange rates E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

-5872

Cash and equivalents at the beginning of the period

4000

Cash and equivalents at the end of the period

-1872

EXERCISE 3 LESSON 7 Classify the following operations by type of activity according to the model of the Cash Flow Statement established in the P.G.C. Indicate also the amount of the cash collection or payment. Operations

Investing

Financing

No effect

Cash payment to a supplier for a purchase of inventory made in the previous year: 1,000 Cash receipt from the shareholders to compensate losses accumulated in previous years: 20,000 Cash receipt of a loan received from a financial institution: 100,000 Cash payment of interests generated by a debt with financial institutions: 3,400 Cash receipt from customers for sales made this year and in the previous year: 8,000

5

Cash payment to the City Council for the local taxes: 500 Cash payment of the wages to the employees: 40,000 Cash payment the Tax Agency for the IRPF withholdings to the employees: 4,200 Cash payment for the acquisition of an investment in shares that are classified as held for trading: 3,000 Purchase of a machinery by 20,000. 30% of this amount paid in 18 months time. Cash payment to the Tax Agency for the income tax of the previous year: 38,000 Increase in the fair value of the held for trading portfolio: 1,100 Sale in cash by 26,000 of a land that had a book value of 12,000 Cash payment of the rent of a building for November and December of this year and January of next year: 570 Cash collection of a subvention from the City Council to compensate operating losses: 40,000 Cash collection of a grant, obtained at the end of the previous year, to finance the purchase of a new machinery: 87,000 Transfer to income for the year of a portion of a capital grant: 8,700 Cash payment of a fine of 45,200 for environmental damage. The company had registered a long-term provision of 46,000. Increase in capital stock of 20,000 with a share premium of 1,000. Uncalled subscribed capital receivable is 10,000. Income for the year is 15,000 and 10,000 are distributed to dividends. The previous year the company had paid 1,000 as dividends paid in advance.

6

SOLUTION Operations Investing Financing Cash payment to a supplier for a purchase of inventory made in the previous year: 1,000 Cash receipt from the shareholders to compensate losses accumulated in previous years: 20,000 Cash receipt of a loan received from a financial institution: 100,000 Cash payment of interests generated by a debt with financial institutions: 3,400 Cash receipt from customers for sales made this year and in the previous year: 8,000 Cash payment to the City Council for the local taxes: 500 Cash payment of the wages to the employees: 40,000 Cash payment the Tax Agency for the IRPF withholdings to the employees: 4,200 Cash payment for the acquisition of an investment in shares that are classified as held for trading: 3,000 Purchase of a machinery by 20,000. 30% of this amount paid in 18 months time. Cash payment to the Tax Agency for the income tax of the previous year: 38,000 Increase in the fair value of the held for trading portfolio: 1,100 Sale in cash by 26,000 of a land that had a book value of 12,000 Cash payment of the rent of a building for November and December of this year and January of next year: 570 Cash collection of a subvention from the City Council to compensate operating losses: 40,000 Cash collection of a grant, obtained at the end of the previous year, to finance the purchase of a new machinery: 87,000 Transfer to income for the year of a portion of a capital grant: 8,700 Cash payment of a fine of 45,200 for environmental damage. The company had registered a long-term provision of 46,000. Increase in capital stock of 20,000 with a share premium of 1,000. Uncalled subscribed capital receivable is 10,000. Income for the year is 15,000 and 10,000 are distributed to dividends. The previous year the company had paid 1,000 as dividends paid in advance.

No effect

(1,000) 20,000 100,000 (3,400) 8,000 (500) (40,000) (4,200) (3,000) (14,000) (38,000) XXX 26,000 (570) 40,000 87,000 XXX (45,200) 11,000 (9,000)

7

EXERCISE 4 LESSON 7 Company ABC, Ltd. has disclosed the following financial statements at the end of year 2009. Assets Constructions Machinery Long-term receivable from buyers of fixed assets Inventories (finished products) Accounts receivable

2009 1,800 4,950 50 1,500 2,700

Receivable from public authorities (capital grants)

200

Cash

650

Total

11,850

2008

Equity and Liabilities

2,000 Capital stock 5,300 Legal reserves

2009 5,550 850

5,000 700

506

400

- 200 280

-

1,024 120

1,324 -

700

1,220

2,250 570 200 11,850

2,950 750 116 12,460

- Income for the year 2,200 Dividends paid in advance 2,250 Capital grants Long-term debt payable to - credit institutions Deferred tax liability Short-term debt payable to 710 credit institutions Accounts payable for purchases Accounts payable for services Liability for current tax 12,460 Total

2008

2009 A) CONTINUING OPERATIONS 1. Net turnover.

30,176

a) Sales.

30,176

4. Procurements.

(20,700)

a) Consumption of goods for sale.

(20,700)

7. Other operating expenses.

(7,670)

a) Outside services.

(7,620)

c) Losses, impairment and change in provisions for trade operations. 8. Fixed assets depreciation expense.

(50) (1,200)

11. Impairment and income from disposal of non-current assets.

50

b) Income from disposals and others.

50

A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11)

656

12. Financial revenues.

50

b) From marketable securities and other financial instruments.

50

A.2) FINANCIAL INCOME (12+13+14+15+16)

50

A.3) INCOME BEFORE TAXES (A.1+A.2) 17. Income tax.

706 (200)

A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17)

506

A.5) INCOME FOR THE YEAR (A.4+18)

506

COMPLEMENTARY INFORMATION: 1.- During 2009 the company made the distribution of 2008 net income. A portion of this income was distributed as reserves and another was paid as dividends in 2009. Moreover, the company made a payment of interim dividends at the beginning of June. 2.- A machinery was sold during 2009 for 100 m.u. Its adquisition price was 250 m.u. and the accumulated depreciation was 200 m.u. A new machinery has also been bought with a cost of 700 m.u.

REQUIRED: Prepare the Cash Flow Statement for 2009. 8

SOLUTION A) CASH FLOWS FROM OPERATING ACTIVITIES

2009 706

1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+). e) Income from disposal of non-current assets (+/-). g) Financial revenues (-). 3. Changes in working capital

1.200 -

50

-

50 700

a) Inventory (+/-). b) Accounts receivables and other receivables (+/-). d) Accounts payables and other payables (+/-). 4. Other cash flows from operating activities

-

450

-

880 50

c) Cash receipts of interests (+). d) Cash receipts (payments) for income taxes (+/-). 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4)

-

116 1.110

B) CASH FLOWS FROM INVESTMENT ACTIVITIES 6. Cash payments for investments (-) c) Tangible fixed assets.

-700

7. Cash receipts from disinvestments (+) c) Tangible fixed assets. 8. Cash flows from investment activities (7-6)

50 -650

C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). e) Grants, donations and legacies received (+). 10. Cash receipts and payments for debt instruments

550 200

b) Refunds and amortization of 4. Other debt (-). 11. Cash payments of dividends and remuneration of other equity instruments.

-820

a) Dividends (-). 12. Cash flows from financing activities (+/-9+/-10-11)

-450 -520

D) Effect of changes in exchange rates E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

-60

Cash and equivalents at the beginning of the period

710

Cash and equivalents at the end of the period

650

9

EXERCISE 5 LESSON 7 Company XYZ, Ltd. has published the following financial statements in year 2009: Assets Tangible fixed assets Long term financial investments Inventories Accounts receivable Cash

Total

2009 2008 Equity and Liabilities 23,350 23,300 Capital stock 15,100 15,500 Legal reserves 11,850 10,900 Income for the year 9,200 8,600 Capital subventions 500 700 Long-term debt payable to credit institut. Deferred tax liability Short-term debt payable to credit institut. Interest payable Accounts payable for purchases Liability for current tax 60,000 59,000 Total

2009 2008 35,000 35,000 9,650 9,000 1,950 1,300 560 630 2,400 240 270 600 800 75 8,475 11,300 1,050 700 60,000 59,000 2009

A) CONTINUING OPERATIONS 1. Net turnover. a) Sales. 4. Procurements. a) Consumption of goods for sale. 6. Personnel expenses. a) Wages, salaries and similar expenses. 7. Other operating expenses. a) Outside services. 8. Fixed assets depreciation expense. 9. Transfer of grants of non-financial non-current assets and others. 11. Impairment and income from disposal of non-current assets. b) Income from disposals and others. A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11) 12. Financial revenues. a) From holdings in equity instruments. 13. Financial expenses. b) Of third parties. 16. Impairment and income from disposal of financial instruments. a) Impairment and losses. A.2) FINANCIAL INCOME (12+13+14+15+16) A.3) INCOME BEFORE TAXES (A.1+A.2) 17. Income tax. A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17) A.5) INCOME FOR THE YEAR (A.4+18)

20,150 20,150 -11,850 - 11,850 - 1,800 - 1,800 - 800 - 800 - 2,100 100 - 250 - 250 3,450 50 50 - 100 - 100 - 400 - 400 -450 3,000 - 1,050 1,950 1,950

Additional information: − The 15th of June of 2009 the company made the distribution of the income of the previous year, half of it was taken to reserves and the other half was paid as dividends. − The 1st of October of 2009 a vehicle was sold in cash for 600 m.u. This vehicle had been bought the 1st of January of 2004 for 2,000 m.u. and has been depreciated by a 10% each year. − The 30th of September of 2009 a new vehicle was bought with a cost of 3,000 m.u. To finance the purchase, that same day the company obtained a loan form a financial institution for the same amount, which will be given back in 5 years at equal amounts. The annual interest is 10% on the outstanding amount and will be paid at the end of each year. − The 12th of February of 2009 the company paid the final portion of a long-term loan received in a previous year. REQUIRED: Prepare the Cash Flow Statement for year 2009.

10

SOLUTION A) CASH FLOWS FROM OPERATING ACTIVITIES

2009 3.000

1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+).

2.100

b) Value corrections for impairment (+/-). d) Transfer of grants (-).

400 -

e) Income from disposal of non-current assets (+/-). g) Financial revenues (-).

100 250

-

50 100

h) Financial expenses (+). 3. Changes in working capital a) Inventory (+/-).

-

950

b) Accounts receivables and other receivables (+/-).

-

600

-

2.825

-

25

d) Accounts payables and other payables (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-).

50

b) Cash receipts of dividends (+). d) Cash receipts (payments) for income taxes (+/-). 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4)

-

700 650

B) CASH FLOWS FROM INVESTMENT ACTIVITIES 6. Cash payments for investments (-) c) Tangible fixed assets.

-3000

7. Cash receipts from disinvestments (+) c) Tangible fixed assets. 8. Cash flows from investment activities (7-6)

600 -2400

C) CASH FLOWS FROM FINANCING ACTIVITIES 10. Cash receipts and payments for debt instruments a) Issuing of 2. Long term debt payable to credit institutions (+).

3000

b) Refunds and amortization of 2. Long term debt payable to credit institutions (-). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). 12. Cash flows from financing activities (+/-9+/-10-11)

-800,00 -650 1550

D) Effect of changes in exchange rates E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

-200

Cash and equivalents at the beginning of the period

700

Cash and equivalents at the end of the period

500

11

EXERCISE 6 LESSON 7 Company ARTEL, Ltd, has available the following information at the end of X1: BALANCE SHEET AT THE END OF X1 31/12/X1 A) NON-CURRENT ASSETS II. Tangible fixed assets 1. Land and structures B) CURRENT ASSETS II. Inventory 1. Comercial 6. Advances to suppliers III. Trade accounts receivables and other receivables 1. Trade accounts receivables for sale and services 3. Sundry accounts receivables V. Short-term financial investments 1. Holdings in equity VI. Accrual accounts VII. Cash and cash equivalents 1. Cash TOTAL ASSETS

630 630

700 700

820 770 50

615 615 ---

260 260 ---

310 280 30

25 25

15 15

20 40 40

---20 20

1,795 31/12/X1

A) EQUITY A-1) Equity I. Capital 1. Registered capital III. Reserves 1. Legal and statutory VII. Income for the year VIII. (Dividends paid in advance) B) NON-CURRENT LIABILITIES II. Long term debt 2. Long term debt payable to credit institutions C) CURRENT LIABILITIES III. Short term debt 2. Short term debt payable to credit institutions 5. Other financial liabilities V. Trade accounts payable and other payables 1. Trade accounts payable for purchases and services 3. Sundry accounts payable 5. Liability for current tax 6. Other payables to public authorities VI. Accrual accounts TOTAL LIABILITIES

31/12/X0

1,660 31/12/X0

805 805

675 675

370 370

395 395

98 (50)

52 ---

89

---

89

--110

160 160 ---

--110 373 270 35 18 50

328 256 60 12 ---

---1,795

50 1,660

The list of expenses and revenues that compose the income of year X1 are the following: 12

Sales revenue Other operating revenue Profits from held for trading portfolio Consumption of goods for sale Personnel expenses Depreciation of tangible fixed assets External services Financial expenses Losses from the sale of tangible fixed assets Reversion of impairment of tangible fixed assets Sale discounts for early payments Income tax expense Income for the year

Amount 4,800 70 10 3,120 1,222 30 33 103 150 10 100 34 98

Additional information: 1.- The distribution of income of year X0 is the following: 40 m.u. are distributed to reserves and 12 m.u. were paid as dividends. Moreover, in X1 the company has paid a dividend in advance of the income of that year, as it can be seen from the balance sheet. 2.- A building has been sold in cash. The acquisition price had been 270 m.u. and the accumulated depreciation in the moment of the sale was 60 m.u. At the end of the year a new building was bought with a cost of 160 m.u. (50 m.u. were paid in cash and the remaining will be paid at the end of next year). These are the only transactions with the tangible fixed assets. 3.- At the end of X1 the company has obtained a long-term loan of 92 m.u. from a financial institution. The opening fees were 3.2 %. 4.- The company has issued capital stock. Half of the amount has been paid by the shareholders and the other half has been transferred from reserves. 5.- Accrual accounts in the current assets are interest paid in advance that correspond to the debt with financial institutions. Accrual accounts in the current liabilities are revenues received in advance. 6.- The profits from the held from trading portfolio were registered at the end of the year for the valuation at fair value of that portfolio. REQUIRED: Prepare the Cash Flow Statement of year X1.

13

SOLUTION A) CASH FLOWS FROM OPERATING ACTIVITIES 1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+). b) Value corrections for impairment (+/-). c) Change in provisions (+/-). d) Transfer of grants (-). e) Income from disposal of non-current assets (+/-). f) Income from disposal of financial instruments (+/-). g) Financial revenues (-). h) Financial expenses (+). j) Change in fair value of financial instruments (+/-). 3. Changes in working capital a) Inventory (+/-). b) Accounts receivables and other receivables (+/-). d) Accounts payables and other payables (+/-). e) Other current liabilities (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-). d) Cash receipts (payments) for income taxes (+/-). 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4) B) CASH FLOWS FROM INVESTMENT ACTIVITIES 6. Cash payments for investments (-) c) Tangible fixed assets. 7. Cash receipts from disinvestments (+) c) Tangible fixed assets. 8. Cash flows from investment activities (7-6) C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). 10. Cash receipts and payments for debt instruments a) Issuing of 2. Long term debt payable to credit institutions (+). b) Refunds and amortization of 2. Long term debt payable to credit institutions (-). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). 12. Cash flows from financing activities (+/-9+/-10-11) D) Effect of changes in exchange rates E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS Cash and equivalents at the beginning of the period Cash and equivalents at the end of the period

132 263 30 -10 0 0 150 0 0 103 -10 -166 -205 50 39 -50 -151 -123 -28 78 -50 -50 60 60 10 65 65 -71 89 -160 -62 -62 -68 20 20 40

14

EXERCISE 7 LESSON 7 Company G-3, Ltd discloses the following information: INCOME STATEMENT 31/12/20X1 A) CONTINUING OPERATIONS 1. Net turnover. a) Sales. 4. Procurements. a) Consumption of goods for sale. d) Impairment of goods for sale. 5. Other operating revenues. a) Accessory and other ordinary income. 6. Personnel expenses. a) Wages, salaries and similar expenses. b) Employee welfare expenses. 7. Other operating expenses. a) Outside services. b) Taxes other than income tax. 8. Fixed assets depreciation expense. 9. Transfers of grants of non-financial non-current assets and others. A-1) OPERATING INCOME

20X1

13. Financial expenses. b) Of third parties. A-2) FINANCIAL INCOME

(75.000) (75.000) (75.000) 2.900.000

A-3) INCOME BEFORE TAXES

(590.000)

17. Income tax.

2.310.000 2.310.000

A-4) INCOME FROM CONTINUING OPERATIONS A-5) INCOME FOR THE YEAR BALANCE SHEET AT THE END OF 20X1 A) NON-CURRENT ASSETS II. Tangible fixed assets. 1. Land and structures. V. Long-term financial investments. 1. Holdings in equity. B) CURRENT ASSETS II. Inventories. 1. Commercial. 6. Advances to suppliers. III. Trade accounts receivables and other receivables. 1. Trade accounts receivables for sale and services 3. Sundry accounts receivables. V. Short-term financial investments. 1. Holdings in equity. VI. Accrual accounts. VII. Cash and cash equivalents. TOTAL ASSETS

17.150.000 17.150.000 (10.475.000) (10.500.000) 25.000 500.000 500.000 (3.425.000) (2.250.000) (1.175.000) (650.000) (150.000) (500.000) (250.000) 125.000 2.975.000

31/12/X1

31/12/X0

15.250.000 12.500.000 15.250.000 12.500.000 140.000 100.000 140.000 100.000 2.975.000 3.700.000 2.475.000 3.450.000 500.000 250.000 1.050.000 770.000 1.000.000 750.000 50.000 20.000 200.000 200.000 12.000 710.000 150.000 20.137.000 17.420.000 15

31/12/X1

31/12/X0

A) EQUITY A-1) Shareholders’ equity. I. Capital. 10.250.000 10.000.000 1. Registered capital. 11.000.000 10.000.000 2. (Uncalled subscribed capital). (750.000) II. Additional paid-in capital. 250.000 III. Reserves. 2.000.000 1.200.000 1. Legal and statutory. 2.000.000 1.200.000 VII. Income for the year. 2.310.000 1.500.000 A-2) Adjustments for changes in value I. Financial instruments available for sale. 28.000 A-3) Grants, donations and legacies received. 612.500 B) NON-CURRENT LIABILITIES I. Long-term provisions. 250.000 4. Other provisions. 250.000 II. Long-term debt. 900.000 3. Long-term debt from leasing contracts. 900.000 IV. Deferred tax liability 274.500 C) CURRENT LIABILITIES III. Short-term debt. 1.100.000 3.000.000 2. Short-term debt payable to credit institutions. 1.000.000 3.000.000 3. Short-term debt from leasing contracts. 100.000 V. Trade accounts payables and other payables. 2.162.000 1.720.000 1. Trade accounts payables for sale and services. 1.175.000 1.000.000 3. Sundry accounts payables. 87.000 95.000 5. Liability for current tax. 500.000 325.000 6. Other payables to public authorities. 400.000 300.000 TOTAL LIABILITIES 20.137.000 17.420.000 ADDITIONAL INFORMATION: 1. Accrual accounts refer to interest paid in advance for the interest expenses of a short-term debt with credit institutions. 2. Distribution of income of X0 has been the following: Legal reserve 800,000; Dividends 700,000. 3. The company issued new capital stock: 1,000 shares were issued at a nominal value of 1,000 m.u. and an issuing value of 1,250 m.u. 4. The capital grant was obtained at the beginning of X1. 5. At the beginning of the year a long-term provision was registered to account for the risk of paying a possible compensation to an employee for an accident in the workplace. 6. In June of X1 the company sold in cash the holdings in equity that had as a short-term investment and that were considered as held for trading. These shares were acquired in X0 for a price of 190,000 m.u. and their value was increased at the end of year X0 because of an increase in its fair value. 7. Land and structures has the following breakdown:

Land Structures Accumulated depreciation of structures

31/12/X1 31/12/X0 5.000.000 4.000.000 12.000.000 10.000.000 (1.750.000) (1.500.000)

The debt from leasing contracts corresponds to the acquisition of a new building with a cost of 1,000,000 m.u.

REQUIRED: Prepare the Cash Flow Statement of year X1. 16

SOLUTION A) CASH FLOWS FROM OPERATING ACTIVITIES 1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+). b) Value corrections for impairment (+/-). c) Change in provisions (+/-). d) Transfer of grants (-). e) Income from disposal of non-current assets (+/-). f) Income from disposal of financial instruments (+/-). g) Financial revenues (-). h) Financial expenses (+). i) Exchange differences (+/-). j) Change in fair value of financial instruments (+/-). k) Other revenues and expenses (-/+). 3. Changes in working capital a) Inventory (+/-). b) Accounts receivables and other receivables (+/-). c) Other current assets (+/-). d) Accounts payables and other payables (+/-). e) Other current liabilities (+/-). f) Other non-current assets and liabilities (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-). b) Cash receipts of dividends (+). c) Cash receipts of interests (+). d) Cash receipts (payments) for income taxes (+/-). e) Other cash payments (receipts) (-/+) 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4) B) CASH FLOWS FROM INVESTMENT ACTIVITIES 6. Cash payments for investments (-) a) Subsidiaries and associated companies. b) Intangible assets. c) Tangible fixed assets. d) Investment property. e) Other financial assets. f) Non-current assets held for sale. g) Other assets. 7. Cash receipts from disinvestments (+) a) Subsidiaries and associated companies. b) Intangible assets. c) Tangible fixed assets. d) Investment property. e) Other financial assets. f) Non-current assets held for sale.

200X 2.900.000 250.000

-

250.000 125.000

75.000

-

725.000 280.000 267.000

-

87.000

-

415.000 3.560.000

-

2.000.000

200.000 17

g) Other assets. 8. Cash flows from investment activities (7-6) C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). b) Amortization of equity instruments (-). c) Acquisition of the own equity instruments (-). d) Disposal of the own equity instruments (+). e) Grants, donations and legacies received (+). 10. Cash receipts and payments for debt instruments a) Issuing of 1. Debentures and other negotiable securities (+). 2. Long term debt payable to credit institutions (+). 3. Long term debt payable to subsidiaries and associated companies (+). 4. Other debt (+). b) Refunds and amortization of 1. Debentures and other negotiable securities (-). 2. Long term debt payable to credit institutions (-). 3. Long term debt payable to subsidiaries and associated companies (-). 4. Other debt (-). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). b) Remuneration of other equity instruments (-). 12. Cash flows from financing activities (+/-9+/-10-11) D) Effect of changes in exchange rates E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS Cash and equivalents at the beginning of the period Cash and equivalents at the end of the period

-

1.800.000

500.000

1.000.000

-

2.000.000

-

700.000

-

1.200.000 560.000 150.000 710.000

18

EXERCISE 8 LESSON 7 – From exam of course 0708 Company XYZ, Ltd. has prepared the following financial Statements at the end of 2009: ASSETS

2009

2008

LIABILITIES

A) NON-CURRENT ASSETS

18.790.000

13.950.000 A) EQUITY

2009

2008

12.100.000

8.000.000

I. Intangible assets.

8.750.000

7.000.000 A-1) Shareholders' equity.

11.050.000

7.300.000

1. Development.

5.000.000

5.000.000 I. Capital.

7.500.000

5.000.000

5. Computer software.

3.750.000

2.000.000

1. Registered capital.

8.000.000

5.000.000

II. Tangible fixed assets.

9.240.000

6.050.000

2. (Uncalled subscribed capital).

1. Land and structures.

5.750.000

4.950.000 III. Reserves.

2.300.000

2.600.000

2. Plant and machinery, tools, furniture and other tangible assets.

3.490.000

1.100.000 1. Legal and statutory.

1.600.000

1.600.000

III. Investment property.

800.000

900.000 2. Other reserves.

2. Structures.

800.000

900.000 VII. Income for the year.

B) CURRENT ASSETS

2.795.000

2.450.000 VIII. (Dividends paid in advance).

-

500.000

700.000 1.450.000 -

1.000.000 -

300.000

200.000

II. Inventories.

900.000

A-3) Grants, donations and legacies 950.000 received.

1. Commercial (goods for sale).

900.000

950.000 B) NON-CURRENT LIABILITIES

400.000

750.000 I. Long-term provisions.

500.000

500.000

400.000

600.000 4. Other provisions.

500.000

500.000

-

150.000 II. Long-term debt.

3.250.000

3.000.000

1.500.000

3.000.000

III. Trade accounts receivables and other receivables. 1. Trade accounts receivables for sale and services. 3. Sundry accounts receivables. V. Short-term financial investments.

1.000.000

1. Holdings in equity.

500.000

2. Loans to companies (Short-term receivable from buyers of fixed assets)

500.000

VI. Accrual accounts.

250.000

VII. Cash and cash equivalents.

245.000

TOTAL ASSETS

21.585.000

-

2. Long-term debt payable to credit institutions. 5. Other financial liabilities (Long-term debt with suppliers of tangible fixed assets). IV. Deferred tax liability.

50.000 C) CURRENT LIABILITIES 700.000 III. Short-term debt. 2. Short-term debt payable to credit 16.400.000 institutions. V. Trade accounts payables and other payables. 1. Trade accounts payables for purchases and services. 3. Sundry accounts payable. 4. Salary payable.

1.050.000

700.000

4.200.000

3.800.000

1.750.000 450.000

300.000

5.285.000

4.600.000

2.150.000

2.070.000

2.150.000

2.070.000

3.135.000

2.530.000

1.000.000

850.000

950.000

150.000

50.000

300.000

5. Liability for current tax.

395.000

6. Other payables to public authorities.

740.000

7. Customer advances. TOTAL LIABILITIES

21.585.000

1.030.000 200.000 16.400.000

19

2009 A) CONTINUING OPERATIONS 1. Net turnover. a) Sales. 4. Procurements. a) Consumption of goods for sale. d) Impairment of goods for sale, raw materials and other consumables. 5. Other operating revenues. a) Accesory and other ordinary income. 6. Personnel expenses. a) Wages, salaries and similar expenses. 7. Other operating expenses. a) Outside services. 8. Fixed assets depreciation expense. 9. Transfer of grants of non-financial non-current assets and others. 11. Impairment and income from disposal of non-current assets. a) Impairment and losses (reversion of impairment) b) Income from disposals and others. A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11) 12. Financial revenues. b) From marketable securities and other financial instruments. b 2) Of third parties. 13. Financial expenses. b) Of third parties. 14. Change in fair value of financial instruments. a) Held for trading and others. A.2) FINANCIAL INCOME (12+13+14+15+16) A.3) INCOME BEFORE TAXES (A.1+A.2) 17. Income tax. A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17)

-

-

-

-

-

20.000.000 20.000.000 11.850.000 12.000.000 150.000 1.000.000 1.000.000 3.000.000 3.000.000 3.200.000 3.200.000 700.000 100.000 300.000 300.000 2.350.000 50.000 50.000 50.000 500.000 500.000 50.000 50.000 400.000 1.950.000 500.000 1.450.000

1. The profits from the held from trading portfolio were registered at the end of the year for the valuation at fair value of that portfolio. 2. The losses of year 2008 have been compensated against reserves. Moreover, in 2009 the company has paid a dividend in advance of the income of that year, as it can be seen from the balance sheet. 3. Accrual accounts in the current assets are expenses paid in advance. 4. A new grant has been received at the end of 2009 for the acquisition of new machinery. The company has also registered the transfer to income of the corresponding portion of a previous grant. 5. The breakdown of the short-term debt with credit institutions is the following:

Short-term debt with credit institution Interest payable

31/12/2009 31/12/2008 2,000,000 2,000,000 150,000

70,000

REQUIRED: Prepare the Cash Flow Statement of year 2009 (only cash flows from operations and cash flows from financing activities).

20

SOLUTION A) CASH FLOWS FROM OPERATING ACTIVITIES 1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+). b) Value corrections for impairment (+/-). d) Transfer of grants (-). e) Income from disposal of non-current assets (+/-). g) Financial revenues (-). h) Financial expenses (+). j) Change in fair value of financial instruments (+/-). 3. Changes in working capital a) Inventory (+/-). b) Accounts receivables and other receivables (+/-). c) Other current assets (+/-). d) Accounts payables and other payables (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-). c) Cash receipts of interests (+). d) Cash receipts (payments) for income taxes (+/-). 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4)

C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). e) Grants, donations and legacies received (+). 10. Cash receipts and payments for debt instruments b) Refunds and amortization of 2. Long term debt payable to credit institutions (-). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). 12. Cash flows from financing activities (+/-9+/-10-11)

-

-

200X 1.950.000 1.000.000 700.000 300.000 100.000 300.000 50.000 500.000 50.000 410.000 50.000 350.000 200.000 210.000 475.000 420.000 50.000 105.000 2.885.000

-

3.100.000 2.500.000 600.000 1.500.000

-

1.500.000

-

200.000 200.000 1.400.000

21

EXERCISE 9 LESSON 7 – From exam of course 0708 Company XYZ, Ltd. has prepared the following financial Statements at the end of 2009: ASSETS A) NON-CURRENT ASSETS

2009 27.050

2008 LIABILITIES 21.050 A) EQUITY

I. Intangible assets.

3.000

3.050 A-1) Shareholders' equity.

3. Intelectual property, trademarks and others.

3.000

3.050 I. Capital.

II. Tangible fixed assets. 1. Land and structures. 2. Plant and machinery, tools, furniture and other.

20.700

13.500

5.700

2.500

15.000

1. Registered capital. 2. (Uncalled subscribed capital).

11.000 III. Reserves.

2009

2008

25.644,5

19.510

24.227

18.425

20.000

14.700

20.000

20.000

-

- 5.300

3.200

2.800

III. Investment property.

1.900

2.000 1. Legal and statutory.

1.800

1.800

2. Structures.

1.900

2.000 2. Other reserves.

1.400

1.000

V. Long-term financial investments.

1.450

2.500 VII. Income for the year.

1.027

925

1. Holdings in equity.

1.450

2.500 A-2) Adjustments for changes in value.

157,5

35

B) CURRENT ASSETS

3.222

4.025 I.

157,5

35

II. Inventories.

1.400

900 received.

1. Commercial (goods for sale).

1.400

900 B) NON-CURRENT LIABILITIES

Financial instruments available for sale.

A-3) Grants, donations and legacies

1.260 2.107,5

1.050 2.965

III. Trade accounts receivables and other receivables.

440

500 I. Long-term provisions.

500

500

1. Trade accounts receivables for sale and services.

100

200 2. Environmental actions.

500

500

3. Sundry accounts receivables.

300

250 II. Long-term debt.

1.000

2.000

4. Employee receivables.

40

V. Short-term financial investments.

60

1. Holdings in equity.

600

2. Loans to companies. VI. Accrual accounts. VII. Cash and cash equivalents. TOTAL ASSETS

10 772 30.272

50 2. Long-term debt payable to credit institutions.

1.000

2.000

607,5

465

500 C) CURRENT LIABILITIES

2.520

2.600

550 III. Short-term debt.

2.010

2.010

2.010

2.010

510

590

80

50

50

20

300

200

80

220

-

100

1.050 IV. Deferred tax liability

20 2. Short-term debt payable to credit institutions. 1.555 V. Trade accounts payables and other. 25.075 1. Trade accounts payables for purchases & s. 3. Sundry accounts payable. 5. Liability for current tax. 6. Other payables to public authorities. 7. Customer advances. TOTAL LIABILITIES

30.272

25.075

22

2009 A) CONTINUING OPERATIONS 1. Net turnover. a) Sales. 4. Procurements. a) Consumption of goods for sale. d) Impairment of goods for sale, raw materials and other consumables. 5. Other operating revenues. a) Accesory and other ordinary income. b) Operating subventions included in income for the year. 6. Personnel expenses. a) Wages, salaries and similar expenses. b) Employee welfare expenses. 7. Other operating expenses. a) Outside services. 8. Fixed assets depreciation expense. 9. Transfer of grants of non-financial non-current assets and others. 11. Impairment and income from disposal of non-current assets. a) Impairment and losses b) Income from disposals and others. A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11) 12. Financial revenues. a) From holdings in equity instruments. a2) Of third parties. b) From marketable securities and other financial instruments. b 2) Of third parties. 13. Financial expenses. b) Of third parties. 14. Change in fair value of financial instruments. b) Transfer to income for the year for available for sale financial instruments. A.2) FINANCIAL INCOME (12+13+14+15+16) A.3) INCOME BEFORE TAXES (A.1+A.2) 17. Income tax. A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17) A.5) INCOME FOR THE YEAR (A.4+18)

4.500 4.500 - 1.150 - 1.250 100 350 200 150 - 650 - 500 - 150 - 450 - 450 - 2.100 500 350 - 50 400 1.350 75 50 50 25 25 - 111 - 111 175 175 139 1.489 - 462 1.027 1.027

Additional information (transactions of 2009): 1. Short-term holdings in equity are a portfolio of stocks classified as “held for trading”. There has been no profit or loss due to a change in the fair value of these stocks. 2. Long-term holdings in equity are a portfolio of stocks classified as “available for sale”. The portfolio includes 100 shares acquired in October of 2008 for a price of 24,5 m.u. per share. The fair value at the end of 2008 was 25 m.u. In June of 2009 half of the portfolio has been sold for a price of 28 m.u. per share. The fair value at the end of 2009 is 29 m.u. 3. The distribution of income of year 2008 is the following: 400 m.u. are distributed to reserves and 525 m.u. were paid as dividends. 4. The uncalled subscribed capital has been called and the company has collected in cash the outstanding amount from the shareholders during 2009. 5. A new capital subvention has been received at the end of the year. 6. Accrual accounts in the current assets are interest paid in advance that correspond to the debt with financial institutions.

23

7. During 2009, machinery that had a cost of 4,000 m.u. has been sold. The accumulated depreciation was 800 m.u. and the profit obtained in the sale was 400 m.u. This was the only sale of tangible fixed assets. 8. There have been several acquisitions of tangible fixed assets. The breakdown of the fixed assets depreciation expense is the following: Depreciation expense of intangible assets Depreciation expense of structures Depreciation expense of plant and machinery Depreciation expense of investment property Total fixed assets depreciation expense

2009 50 500 1,500 50 2,100

REQUIRED: Prepare the Cash Flow Statement of year 2009.

SOLUTION During 2009, machinery that had a cost of 4,000 m.u. has been sold. The accumulated depreciation was 800 m.u. and the profit obtained in the sale was 400 m.u. This was the only sale of tangible fixed assets.

Sale of machinery BV= 4000-800=3200 Selling price= 3200+400 = 3600

Short-term holdings in equity are a portfolio of stocks classified as “held for trading”. There has been no profit or loss due to a change in the fair value of these stocks. Long-term holdings in equity are a portfolio of stocks classified as “available for sale”. The portfolio includes 100 shares acquired in October of 2008 for a price of 24,5 m.u. per share. The fair value at the end of 2008 was 25 m.u. In June of 2009 half of the portfolio has been sold for a price of 28 m.u. per share. The fair value at the end of 2009 is 29 m.u.

(250) Long term holdings in equity 2.450 Purchase 50 Adjustment 150 Adjustment 200 Adjustment 1.400 Sale 1.450 Final balance (133) Adjustments for changes in value 35 105 ∆ FV 122,5 Sale 140 ∆ FV 157,5Final balance (479) Tax liability 15 45 52,5 Sale 60 67,5 Final balance 24

2009 transactions: Increase in value of the 50 shares that are going to be sold: Nº 250 Long term holdings in equity 900 Profits from available for sale financial assets Nº 8301 479

Accounts Deferred tax Tax liability for taxable temporary differences

Sale of 50 shares: Nº 572 Cash 250 Long term holdings in equity

Debit 150

150 Debit 45

Debit 1.400

Change in fair value (50 shares than remain): Nº 250 Long term holdings in equity 900 Profits from available for sale financial assets Nº 8301 479

Accounts Deferred tax Tax liability for taxable temporary differences

Debit 52,5

Debit 200

175 Credit

Credit 200

Debit 60

Credit 60

Nº Debit 8301 Deferred tax 52,5 1330 Adjustments for changes in value of financial instruments 122,5 available for sale 802 Transfers of profits from available for sale financial assets Profits from available for sale financial assets

Credit

52,5

Regularization of group 8 & 9 accounts: Nº Debit 900 Profits from available for sale financial assets 150 8301 Deferred tax 1330 Adjustments for changes in value of financial instruments available for sale

Nº 900

Credit 1.400

Debit Transfers of profits from available for sale financial 175 assets 7632 Profits from available for sale portfolio Accounts Tax liability for taxable temporary differences Deferred tax

Credit 45

Nº 802

Nº 479 8301

Credit

Debit 200

Credit 45 105

Credit

175

Credit 25

8301 Deferred tax 1330 Adjustments for changes in value of financial instruments available for sale

60 140

A new capital subvention has been received at the end of the year.

(130) Grants, donations and legacies 350 transfer 1.050 Previous grant 560 New grant 1.800 Final Balance (479) Tax liability 150 450 240 540 Final balance

Nº 4708 940

Receivable from public authorities Revenues of official capital grants

Nº 8301 479

Accounts Deferred tax Tax liability for taxable temporary differences

Nº 572 4708

Cash Receivable from public authorities

Debit 800

Credit 800

Debit 240

Credit 240

Debit 800

Credit 800

Moreover, 500 have been transfer of the former grant: Nº 840 746 Nº 479 8301

Transfer of official capital grants Capital grants, donations, and legacies transferred to income for the year Accounts Tax liability for taxable temporary differences Deferred tax

Debit 500

Credit 500

Debit 150

Credit 150

Regularization of group 8 & 9 accounts: Nº 940 Revenues of oficial capital grants 8301 Deferred tax 130 Grants, donations and legacies

Debit 800

Credit 240 560 26

Nº 8301 Deferred tax 130 Grants, donations and legacies 840 Transfer of official capital grants

Debit 150 350

Credit 500

The breakdown of the fixed assets depreciation expense is the following: Depreciation expense of intangible assets Depreciation expense of structures Depreciation expense of plant and machinery Depreciation expense of investment property Total fixed assets depreciation expense

2009 50 500 1,500 50 2,100

Acquisitions of non-current assets:

Intangible Land and Structures Plant and machinery Investment property

Initial Balance 3050 2500

- Dep expense -50 - 500

11000

-1500

2000

-50

+/impairment

- sales +purchases = Final Balance 3000 0 5700 3700 -3200

-50

8700

15000 1900

27

A) CASH FLOWS FROM OPERATING ACTIVITIES 1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+). b) Value corrections for impairment (+/-). d) Transfer of grants (-). e) Income from disposal of non-current assets (+/-). f) Income from disposal of financial instruments (+/-). g) Financial revenues (-). h) Financial expenses (+). j) Change in fair value of financial instruments (+/-). 3. Changes in working capital a) Inventory (+/-). b) Accounts receivables and other receivables (+/-). d) Accounts payables and other payables (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-). b) Cash receipts of dividends (+). c) Cash receipts of interests (+). d) Cash receipts (payments) for income taxes (+/-). 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4) B) CASH FLOWS FROM INVESTMENT ACTIVITIES 6. Cash payments for investments (-) c) Tangible fixed assets. e) Other financial assets. 7. Cash receipts from disinvestments (+) c) Tangible fixed assets. e) Other financial assets. 8. Cash flows from investment activities (7-6) C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). e) Grants, donations and legacies received (+). 10. Cash receipts and payments for debt instruments a) Issuing of 2. Long term debt payable to credit institutions (+). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). 12. Cash flows from financing activities (+/-9+/-10-11) E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS Cash and equivalents at the beginning of the period Cash and equivalents at the end of the period

-

-

200X 1.489 1.111 2.100 50 500 400 150 75 111 25 620 500 60 180 388 101 50 25 362 1.592

-

12.500 12.400 100 5.550 3.600 1.950 6.950

-

6.100 5.300 800 1.000

-

1.000 525 525 4.575 783 1.555 772

28

EXERCISE 10 LESSON 7 – From exam of course 0708 Company XYZ, Ltd. has prepared the following financial Statements at the end of 2009: ASSETS

2009

2008

A) NON-CURRENT ASSETS

199.500

163.750 A) EQUITY

190.050

123.140

II. Tangible fixed assets.

199.500

162.000 A-1) Shareholders' equity.

183.400

116.000

1. Land and structures. 2. Plant and machinery, tools, furniture and other tangible assets. V. Long-term financial investments.

161.100

124.000 I. Capital.

137.500

100.000

150.000

100.000

1. Holdings in equity. B) CURRENT ASSETS

2009

38.400

2008 LIABILITIES

38.000

1. Registered capital.

-

1.750

-

1.750 III. Reserves.

64.985

2. (Uncalled subscribed capital).

29.450 1. Legal and statutory.

II. Inventories.

20.000

14.000 2. Other reserves.

1. Commercial (goods for sale). III. Trade accounts receivables and other receivables. 1. Trade accounts receivables for sale and services.

20.000

14.000 VII. Income for the year.

4. Employee receivables. VII. Cash and cash equivalents. 1. Cash. TOTAL ASSETS

15.000 9.000 6.000 29.985 29.985 264.485

5.000

A-2) Adjustments for changes in value.

5.000 I. Financial instruments available for sale. A-3) Grants, donations and legacies received. 10.450 B) NON-CURRENT LIABILITIES -

10.450 II. Long-term debt.

- 12.500

-

16.000

20.000

15.000

15.000

1.000

5.000

29.900

- 4.000

-

140

-

140

6.650

7.000

51.350

63.060

48.500

60.000

48.500

60.000

2.850

3.060

C) CURRENT LIABILITIES

23.085

7.000

III. Short-term debt.

13.500

-

2. Short-term debt payable to credit institutions. V. Trade accounts payables and other payables. 1. Trade accounts payables for purchases and services. 5. Liability for current tax.

13.500

193.200 2. Long-term debt payable to credit institutions. IV. Deferred tax liability

6. Other payables to public authorities. VI. Short term accrual accounts. TOTAL LIABILITIES

9.450

7.000

600

6.500

8.750 100

500

135 264.485

193.200

2009 A) CONTINUING OPERATIONS 1. Net turnover. a) Sales.

55.000 55.000

4. Procurements.

- 15.200

a) Consumption of goods for sale.

- 15.200

5. Other operating revenues.

29.955

a) Accessory and other ordinary income.

26.000

b) Operating subventions included in income for the year.

3.955

6. Personnel expenses.

- 8.000

a) Wages, salaries and similar expenses.

- 8.000

7. Other operating expenses.

- 1.200

a) Outside services. 8. Fixed assets depreciation expense. 9. Transfer of grants of non-financial non-current assets and others. 11. Impairment and income from disposal of non-current assets.

- 1.200 - 14.000 2.000 - 1.000

29

b) Income from disposals and others.

- 1.000

A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11)

47.555

12. Financial revenues.

45

b) From marketable securities and other financial instruments.

45

b 2) Of third parties.

45

13. Financial expenses.

- 1.800

b) Of third parties.

- 1.800

14. Change in fair value of financial instruments. b) Transfer to income for the year for available for sale financial instruments.

200 200

A.2) FINANCIAL INCOME (12+13+14+15+16)

- 1.555

A.3) INCOME BEFORE TAXES (A.1+A.2)

46.000

17. Income tax.

- 16.100

A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17)

29.900

A.5) INCOME FOR THE YEAR (A.4+18)

29.900

Additional information (transactions of 2009): 1. The losses of 2008 have been compensated against reserves. 2. The company has increased the capital stock at the beginning of 2009. 3. Long-term holdings in equity are a portfolio of stocks classified as “available for sale” that has been sold in 2009. The increase in fair value of this portfolio was 200 in 2008. REQUIRED: • Register the operations of 2009 described in the additional information. • Prepare the Statement of Changes in Equity of year 2009. • Prepare the Cash Flow Statement of year 2009 (only cash flows from operations and cash flows from financing activities).

SOLUTION 1. The losses of 2008 have been compensated against reserves.

Nº 112 129

Accounts Voluntary reserves Income for the year (X-1)

Debit 4,000

Credit 4,000

2. The company has increased the capital stock at the beginning of 2009.

Nº 103 572 100

Accounts Uncalled subscribed capital receivable Cash Capital stock

Debit 12,500 37,500

Credit 50,000

3. Long-term holdings in equity are a portfolio of stocks classified as “available for sale” that has been sold in 2009. The increase in fair value of this portfolio was 200 in 2008.

Sale: Nº 572 Cash 250 Long term holdings in equity

Debit 1,750



Debit

Credit 1,750 Credit 30

802

Transfers of profits from available for sale financial 200 assets 7632 Profits from available for sale portfolio Nº 479 8301

Accounts Tax liability for taxable temporary differences Deferred tax

Debit 60

200 Credit 60

Regularization of group 8 & 9 accounts: Nº Debit 8301 Deferred tax 60 1330 Adjustments for changes in value of financial instruments 140 available for sale 802 Transfers of profits from available for sale financial assets

Credit

200

FROM THE BALANCE SHEET AND INCOME STATEMENT: A new capital grant has been received at the end of the year, and a portion of a previous capital grant has been transferred to income.

(130) Grants, donations and legacies 1,400 transfer 7,000 Previous grant 1,050 New grant (net of taxes) 6,650 Final Balance

600

Nº 572 940

(479) Tax liability 3,000 450 2,850 Final balance Accounts Cash Revenues of official capital grants

Nº Accounts 8301 Deferred tax 479 Tax liability for taxable temporary differences

Nº 940 8301 130

Accounts Revenues of official capital grants Deferred tax Official capital grants

Debit 1,500

Credit 1,500

Debit 450

Credit 450

Debit 1,500

Credit 450 1,050

Transfer of a portion of the capital grants from previous years: Nº 840

Accounts Transfers of official capital grants

Debit 2,000

Credit

31

Capital grants, donations and legacies transferred to income for the year

746

Nº Accounts 479 Tax liability for taxable temporary differences 8301 Deferred tax Nº 8301 130 840

Accounts Deferred tax Official capital grants Transfers of official capital grants

2,000 Debit 600

Credit 600

Debit 600 1,400

Credit 2,000

STATEMENT OF RECOGNIZED REVENUES AND EXPENSES

2009 A) Income for the year

29900

Revenues and expenses recognized directly in equity

I. From valuation of financial instruments 1. Gains/losses from available for sale financial assets 2. Other revenues/expenses II. From hegding operations III. Grants, donations and legacies

1500

IV. From actuarial gains and losses and other adjustments V. Tax effect B) Total revenues and expenses recognized directly in equity (I+II+III+IV+V)

(450) 1050

Transfers to the income statement

VI. From valuation of financial instruments 1. Revenues/expenses from available for sale financial assets

-200

2. Other revenues/expenses VII. From hegding operations VIII. Grants, donations and legacies IX. Tax effect

-2000 660

C) Total transfers to the income statement (VI+VII+VIII+IX)

-1540

TOTAL RECOGNIZED REVENUES AND EXPENSES (+A+B+C)

29410

32

Capital

STATEMENT OF ALL CHANGES IN EQUITY Registered C. BALANCE, END OF YEAR 200X – 1

Uncalled

Additional paid-in capital

Reserves

100.000

20.000

100.000

20.000

Prior years' income

Other Income for owners' the year contributions

(Dividend paid in advance)

-4.000

Adjustments for changes in value

Grants, donations and legacies received

140

7.000

140

7.000

123.140

-140

-350

29.410

TOTAL

123.140

I. Adjustments for changes in accounting policies, 200X-1. II. Adjustments for errors, 200X-1. D. ADJUSTED BALANCE, BEGINNING OF YEAR 200X

- 4.000 29.900

I. Total recognized revenues and expenses. II. Transactions with equity holders. 1. Capital increases.

50.000

-12.500

37.500

2. ( - ) Capital reductions. 3. Conversion of financial liabilities in equity. (conversion of debentures, debts writting off).

-

4. ( - ) Dividends distributions. 5. Transactions with the entity's shares (net). 6. Increase (reduction) of equity from a business combination.

-

7. Other transactions with equity holders III. Other changes in equity. E. BALANCE, END OF YEAR 200X

150.000

-12.500

- 4.000

4.000

16.000

-

0 29.900

-

0

6.650

190.050

33

A) CASH FLOWS FROM OPERATING ACTIVITIES 1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+). b) Value corrections for impairment (+/-). c) Change in provisions (+/-). d) Transfer of grants (-). e) Income from disposal of non-current assets (+/-). f) Income from disposal of financial instruments (+/-). g) Financial revenues (-). h) Financial expenses (+). i) Exchange differences (+/-). j) Change in fair value of financial instruments (+/-). k) Other revenues and expenses (-/+). 3. Changes in working capital a) Inventory (+/-). b) Accounts receivables and other receivables (+/-). c) Other current assets (+/-). d) Accounts payables and other payables (+/-). e) Other current liabilities (+/-). f) Other non-current assets and liabilities (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-). b) Cash receipts of dividends (+). c) Cash receipts of interests (+). d) Cash receipts (payments) for income taxes (+/-). e) Other cash payments (receipts) (-/+) 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4) C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). b) Amortization of equity instruments (-). c) Acquisition of the own equity instruments (-). d) Disposal of the own equity instruments (+). e) Grants, donations and legacies received (+). 10. Cash receipts and payments for debt instruments a) Issuing of 1. Debentures and other negotiable securities (+). 2. Long term debt payable to credit institutions (+). 3. Long term debt payable to subsidiaries and associated companies (+). 4. Other debt (+). b) Refunds and amortization of 1. Debentures and other negotiable securities (-). 2. Long term debt payable to credit institutions (-). 3. Long term debt payable to subsidiaries and associated companies (-). 4. Other debt (-). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). b) Remuneration of other equity instruments (-). 12. Cash flows from financing activities (+/-9+/-10-11) D) Effect of changes in exchange rates E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS Cash and equivalents at the beginning of the period Cash and equivalents at the end of the period

200X 46.000 14.555 14.000 -

2.000 1.000

-

45 1.800

-

200

-

16.300 6.000 4.000

-

6.300

-

8.970 1.800

-

180 7.350 35.285

39.000 37.500

1.500 2.000

13.500

-

11.500 41.000 19.535 10.450 29.985

34

EXERCISE 11 LESSON 7 – From exam of course 0708 Company RST, Ltd. provides the following information at the end of 2009: ASSETS

2009

2008

EQUITY AND LIABILITIES

2008

A) NON-CURRENT ASSETS

6,750

8,300

8,746

7,350

II. Tangible fixed assets. 2. Plant and machinery, Tools, furniture and other tangible fixed assets.

6,750

7,300 A-1) Shareholders’ equity.

8,431

7,000

6,750

7,300

6,550

6,000

6,550

6,000

III. Investment property

1,000

1. Land

1,000

A) EQUITY

2009

I. Capital. 1. Registered capital. III. Reserves.

850 850

700

1,031

400

B) CURRENT ASSETS

7,575

5,560 1. Legal and statutory.

II. Inventories.

1,500

2,200 VII. Income for the year.

1. Comercial (goods for sale).

1,500

III. Trade accounts receivables and other receivables.

2,700

1. Trade accounts receivables for sale and services.

2,700

2,200 VIII. (Dividend paid in advance) A-3) Grants, donations and legacies 2,250 received. 2,250 B) NON-CURRENT LIABILITIES

V. Short-term financial investments.

525

1. Holdings in equity.

525

VI. Accrual accounts.

II. Long-term debt. 2. Long term debt payable to credit institutions. 5. Other financial liabilities.

10

5

VII. Cash and cash equivalents.

2,840

1,105

IV. Deferred tax liability

1. Cash.

2,840

1,105

C) CURRENT LIABILITIES III. Short-term debt. 2. Short term debt payable to credit institutions. V. Trade accounts payables and other payables. 1. Trade accounts payables for purchases. 3. Sundry accounts payable.

TOTAL ASSETS

14,325

13,860 5. Liability for current tax. TOTAL EQUITY AND LIABILITIES

700

(100) 315

350

1,859

1,474

1,724

1,324

1,024

1,324

700 135

150

3,720

5,036

700

1,220

700

1,220

3,020

3,816

2,250

2,950

580 190 14,325

750 116 13,860

Income for the year 2009 has the following components: ACCOUNT Change in inventory of goods for sale Grants, donations and legacies transferred to income for the year Income tax expense Interest of debt from financial institutions Losses for uncollective accounts Losses from impairment of trade accounts receivable Operating grants, donations and legacies Profits from disposal of investment property Profits from disposal of tangible fixed assets Profits from held for trading portfolio Purchase of goods for sale Revenue form holdings in equity instruments, other companies Sale of goods for sale Sale returns of goods for sale Social security in charge of the company Supplies Tangible fixed assets depreciation expense

AMOUNT 700 50 200 1,020 50 50 176 500 50 25 20,000 50 30,500 500 1,000 600 1,200 35

Wages and salaries

5,000

Additional information (transactions of 2009): 1.- The distribution of income of 2008 has been the following: reserves: 150; dividends: 250. 2.- A machinery has been sold for 100 m.u. during 2009. The acquisition value of the machinery was 250 m.u. and the accumulated depreciation in the moment of the sale was 200 m.u. Moreover, a new machinery was bought at the end of the year. 3.- Investment property (land) has been sold as well. 4.- The capital grant was obtained and received in cash at the end of 2008. The grant was received to finance the acquisition of new equipment that has an annual depreciation expense of 50 m.u. 5.- Accrual accounts in the current assets are interest expenses paid in advance. 6.- During 2009 the company has bought an investment in shares of the BBVA that has been classified as held for trading. 7.- The company has increased the capital stock at the beginning of 2009. REQUIRED: • Prepare the Income Statement of year 2009. • Prepare the Statement of Changes in Equity of year 2009. • Prepare the Cash Flow Statement of year 2009.

36

SURNAME____________________________________ D.N.I._________________

NAME_____________

INCOME STATEMENT (Debit) Credit 2009 A) CONTINUING OPERATIONS 1. Net turnover. a) Sales. b) Services rendered. 2. Change in inventory of finished goods and work-in process. 3. Work performed for own assets. 4. Procurements. a) Consumption of goods for sale. b) Consumption of raw materials and other consumables. c) Work performed by other companies. d) Impairment of goods for sale, raw materials and other consumables. 5. Other operating revenues. a) Accessory and other ordinary income. b) Operating subventions included in income for the year. 6. Personnel expenses. a) Wages, salaries and similar expenses. b) Employee welfare expenses. c) Provisions. 7. Other operating expenses. a) Outside services. b) Taxes other than income tax. c) Losses, impairment and change in provisions for trade operations. d) Other operating expenses. 8. Fixed assets depreciation expense. 9. Transfer of grants of non-financial non-current assets and others. 10. Excess of provisions. 11. Impairment and income from disposal of non-current assets. a) Impairment and losses. b) Income from disposals and others. A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11)

30,000 30,000

-20,700 -20,700

176 176 -6,000 -5,000 -1,000 -700 -600 -100 -1,200 50 550 550 2,176

37

12. Financial revenues.

50

a) From holdings in equity instruments. a1) Of subsidiaries and associated companies. a2) Of third parties.

50

b) From marketable securities and other financial instruments. b 1) Of subsidiaries and associated companies. b 2) Of third parties. 13. Financial expenses.

-1,020

a) Of subsidiaries and associated companies. b) Of third parties.

-1,020

c) From capitalization of provisions. 14. Change in fair value of financial instruments.

25

a) Held for trading and others.

25

b) Transfer to income for the year for available for sale financial instruments. 15. Exchange diferences. 16. Impairment and income from disposal of financial instruments. a) Impairment and losses. b) Income from disposals and others. A.2) FINANCIAL INCOME (12+13+14+15+16)

-945

A.3) INCOME BEFORE TAXES (A.1+A.2)

1,231

17. Income tax.

-200

A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17)

1,031

B) DISCONTINUED OPERATIONS 18. Post-tax income of discontinued operations. A.5) INCOME FOR THE YEAR (A.4+18)

1,031

38

SURNAME____________________________________ D.N.I._________________

NAME_____________

STATEMENT OF RECOGNIZED REVENUES AND EXPENSES A) Income for the year

2009 1,031

Revenues and expenses recognized directly in equity

I. From valuation of financial instruments 1. Gains/losses from available for sale financial assets 2. Other revenues/expenses II. From hegding operations III. Grants, donations and legacies IV. From actuarial gains and losses and other adjustments V. Tax effect B) Total revenues and expenses recognized directly in equity (I+II+III+IV+V) Transfers to the income statement

VI. From valuation of financial instruments 1. Revenues/expenses from available for sale financial assets 2. Other revenues/expenses VII. From hegding operations VIII. Grants, donations and legacies

-50

IX. Tax effect

15

C) Total transfers to the income statement (VI+VII+VIII+IX)

-35

TOTAL RECOGNIZED REVENUES AND EXPENSES (+A+B+C)

996

39

STATEMENT OF ALL CHANGES IN EQUITY C. BALANCE, END OF YEAR 2008

Capital Registered

Uncalled

Additional paid-in capital

Reserves

6,000

700

6,000

700

Prior years' income

Other owners' contributions

Grants, donations and legacies received

TOTAL

-100

350

7,350

-100

350

7,350

-35

996

Income for the year

(Dividend paid in advance)

400

0

Other equity instruments

Adjustments for changes in value

I. Adjustments for changes in accounting policies, 2008 II. Adjustments for errors, 2008 D. ADJUSTED BALANCE, BEGINNING OF YEAR 2009

400

1,031

I. Total recognized revenues and expenses. II. Transactions with equity holders. 1. Capital increases.

550

550

2. ( - ) Capital reductions. 3. Conversion of financial liabilities in equity. (conversion of debentures, debts writting off).

-250

4. ( - ) Dividends distributions.

100

-150

5. Transactions with the entity's shares (net). 6. Increase (reduction) of equity from a business combination. 7. Other transactions with equity holders. III. Other changes in equity. E. BALANCE, END OF YEAR 2009

6,550

150

-150

850

0

0 1,031

0

315

8,746

40

A) CASH FLOWS FROM OPERATING ACTIVITIES 1. Income before taxes 2. Adjustments to income a) Depreciation of fixed assets (+). b) Value corrections for impairment (+/-). c) Change in provisions (+/-). d) Transfer of grants (-). e) Income from disposal of non-current assets (+/-). f) Income from disposal of financial instruments (+/-). g) Financial revenues (-). h) Financial expenses (+). i) Exchange differences (+/-). j) Change in fair value of financial instruments (+/-). k) Other revenues and expenses (-/+). 3. Changes in working capital a) Inventory (+/-). b) Accounts receivables and other receivables (+/-). c) Other current assets (+/-). d) Accounts payables and other payables (+/-). e) Other current liabilities (+/-). f) Other non-current assets and liabilities (+/-). 4. Other cash flows from operating activities a) Cash payments of interests (-). b) Cash receipts of dividends (+). c) Cash receipts of interests (+). d) Cash receipts (payments) for income taxes (+/-). e) Other cash payments (receipts) (-/+) 5. Cash flows from operating activities (+/-1+/-2+/-3+/-4) B) CASH FLOWS FROM INVESTMENT ACTIVITIES 6. Cash payments for investments (-) a) Subsidiaries and associated companies. b) Intangible assets. c) Tangible fixed assets. d) Investment property. e) Other financial assets. f) Non-current assets held for sale. g) Other assets. 7. Cash receipts from disinvestments (+) a) Subsidiaries and associated companies. b) Intangible assets. c) Tangible fixed assets. d) Investment property. e) Other financial assets. f) Non-current assets held for sale. g) Other assets. 8. Cash flows from investment activities (7-6)

1.231 1.545 1.200 0 -50 -550 0 -50 1.020 -25 -620 700 -450 0 -870 0 -1.101 -1.025 50 0 -126 1.055 -500

-500

1.600

100 1.500

1.100 41

C) CASH FLOWS FROM FINANCING ACTIVITIES 9. Cash receipts and payments for equity instruments a) Issuing of equity instruments (+). b) Amortization of equity instruments (-). c) Acquisition of the own equity instruments (-). d) Disposal of the own equity instruments (+). e) Grants, donations and legacies received (+). 10. Cash receipts and payments for debt instruments a) Issuing of 1. Debentures and other negotiable securities (+). 2. Long term debt payable to credit institutions (+). 3. Long term debt payable to subsidiaries and associated companies (+). 4. Other debt (+). b) Refunds and amortization of 1. Debentures and other negotiable securities (-). 2. Long term debt payable to credit institutions (-). 3. Long term debt payable to subsidiaries and associated companies (-). 4. Other debt (-). 11. Cash payments of dividends and remuneration of other equity instruments. a) Dividends (-). b) Remuneration of other equity instruments (-). 12. Cash flows from financing activities (+/-9+/-10-11) D) Effect of changes in exchange rates E) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS Cash and equivalents at the beginning of the period Cash and equivalents at the end of the period

550 550

-820

-820

-150 -150 -420 1.735 1.105 2.840

42

Loading...

EXERCISES LESSON 7 CASH FLOW STATEMENT

DEPARTAMENTO DE CONTABILIDAD Y ECONOMÍA FINANCIERA ESCUELA UNIVERSITARIA DE ESTUDIOS EMPRESARIALES FINANCIAL ACCOUNTING (DIPLOMATURA EN CIENCIAS EMP...

457KB Sizes 2 Downloads 7 Views

Recommend Documents

Exercises and solutions--Cash flow statement - studylib.net
Class Exercises Exercise 1 Statement of Cash Flow The following statements have been provided from the annual reports fo

Exercises and solutions--Cash flow statement - Class Exercises
View Homework Help - Exercises and solutions--Cash flow statement from FINANCE 101 at Arab Academy for Science and Techn

Cash Flow Statement - How a Statement of Cash Flow Works
The cash flow statement is commonly presented using the indirect method. It starts with net income or loss, followed by

Cash Flow Statement - ncert
generate cash and cash equivalents and the timing and certainty of their ..... Solution: Cash Flows from Operating Activ

Cash Flow Statement
The annual accounts. ▫ Balance Sheet. ▫ Income Statement. ▫ Statement of Changes in Equity. ▫ Cash Flow Statemen

Group cash flow statement
134.9. CASH FLOWS FROM INVESTING ACTIVITIES. Purchase of property, plant & equipment. (18.5). (102.9). Proceeds on dispo

Cash flow statement - Wikipedia
US GAAP (FAS 95) requires that when the direct method is used to present the operating activities of the cash flow state

Cash FLOW STATEMENT - ICAZ
cash flows arising from taxes on income are normally classified as operating, unless they can be specifically identified

Cash Flow Statement - Zeroinfy
Questions that Cash Flow Statement Answers. 1. • Where did the cash come from? 2. • What purpose cash used for? 3. â

Cash Flow Practice Problem - Topic 7 Statement of Cash Flows
View Notes - Cash Flow Practice Problem from ACCT-UB 1 at NYU. Topic 7: Statement of Cash Flows Practice Problem 3 Below