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Principles of Accounting
BAP 11
Assessment 3 (25%): Individual hand-written assignment
Trimester 2, Year 2018
Student ID Number Student Name
? This is an Individual hand-written assignment.
o Photostats or typed submissions will not be allowed. o Please ensure that your submission must be your own original attempt. Student handwriting will be verified to other hand-written assessments.
? Student answers and submissions are required to be completed in THIS answer booklet in the space provided for every question.
? Due date for this assignment is Week 11 (week starting 23 July 2018): o Your hand-written attempt must be handed to the lecturer by latest end of lecture 11 class. o Late submissions will be subject to a 25% reduction in marks obtained.
? Results for this assessment will be released at the end of week 12.
? For use by Examiners only.
Question Student Mark
1. /10
2. /20
3. /20
4. /10
5. /40
Total /100= /25
Lecturer’s comments
Question 1 (10 marks)
John Smith, the owner-manager of Funny Business Pty Ltd, is unfamiliar with the statement of cash flows that you, as his accountant, prepared. He asks for further explanation. Required
Write a brief presentation explaining the form and content of the statement of cash flows as shown in the figure above.
Question 2 (20 marks)

Question 3 (20 Marks)
Question 4- Multiple Choice Questions (10 Marks)
Please write your answer in capital letters (A, B, C or D) in the table below:
Question Answer
1. Which of the following is incorrect about the statement of cash flows?
a. It is the third basic financial statement.
b. It provides information about cash receipts and cash payments of an entity during a period.
c. It reconciles the ending cash account balance to the balance as per the bank statement.
d. It provides information about the operating, investing and financing activities of the business.
2. Which of the following is not a non-cash activity?
a. Issue of shares to purchase assets.
b. Issue of debt to purchase assets.
c. Payment of cash dividends.
d. Exchange of property, plant and equipment.
3. Which is an example of a cash flow from an operating activity?
a. Payment of wages.
b. Receipt of cash from the issue of shares.
c. Payment of cash dividends to the company’s shareholders.
d. None of the above.
4. Which is an example of a cash flow from an investing activity?
a. Receipt of cash from the issue of debentures.
b. Payment of dividends.
c. Receipt of cash from the sale of equipment.
d. Payment of cash to suppliers for inventory.
5. Cash dividends paid to shareholders are classified on the statement of cash flows as: a. operating activities.
b. investing activities.
c. a combination of (a) and (b).
d. financing activities.
6. Which is an example of a cash flow from a financing activity?
a. Receipt of cash from sale of land.
b. Issue of debt for cash.
c. Purchase of equipment for cash.
d. None of the above.
7. The beginning balance in accounts receivable is $44 000, the ending balance is $42 000, and sales during the period are $129 000. What are cash receipts from customers, assuming no bad debts or discounts allowed?
a. $127 000.
b. $129 000.
c. $131 000.
d. $141 000.
8. Which of the following items is reported on a statement of cash flows prepared using the direct method?
a. Bad debts expense.
b. Increase in accounts receivable.
c. Depreciation expense.
d. Cash payments to suppliers.
9. Profit is $132 000, accounts payable increased $10 000 during the year, inventory decreased $6000 during the year, and accounts receivable increased $12 000 during the year. Using the indirect method, what is net cash provided by operations?
a. $104 000.
b. $116 000.
c. $124 000.
d. $136 000.
10. Non-cash charges that are added back to profit in determining cash provided by operations under the indirect method do not include:
a. depreciation expense.
b. an increase in inventory.
c. amortisation expense.
d. loss on sale of equipment.
Question 5 (40 Marks)
Your parents are considering investing in David Jones Ltd (DJS) shares. They ask you, an accounting expert, to make an analysis of the entity for them. An extract from the five-year summary included in David Jones Ltd 2013 annual report is presented below. All figures are in thousands.
a. Prepare a 5-year trend (horizontal) analysis of sales, gross profit, department store EBIT, financial services EBIT and profit after tax using 2009 as the base year. Comment on the significance of the trend results.
b. Calculate the following for 2013 and 2012:
1. Debt to total assets ratio.
2. Profit margin.
3. Asset turnover.
4. Return on shareholders’ equity.
5. Dividend payout.
c. How would you evaluate David Jones Ltd’s profitability, solvency and investment potential?
d. What other information may be useful in making a decision about investing in David Jones Ltd (DJS) shares?
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