Financial Statements Revision Questions

Description

Financial Statements Revision Questions and Attempted Solutions

This paper attempts to provide solutions to the following accounting questions.

1. An organisation owes £300,000 tax at 1.7.X4 and £450,000 at 30.6.X5. Its income statement for the year to 30.6.X5 includes a tax charge of £400,000. How much tax was actually paid in the year to 30.6.X5?
2. A company purchases a tangible non-current asset for £200,000. It has an estimated scrap value of £20,000 and an expected useful economic life of 10 years. What depreciation will be shown in the income statement for year 3? How would the non-current asset be shown in the statement of financial position at the end of year 3?
3. In case the asset is sold for £120,000 during the 4^th year, how will this affect: The income statement for year 4? The statement of financial position at the end of year 4?
4. What is the effect of sale of the tangible non-current asset on the company’s statement of cash flows?
5. Is it true that cash the lifeblood of the business?
6. What is the purpose of the statement of cash flows and how it supplements a statement of financial position and an income statement?
7. What are the controversies surrounding published statements of cash flows?