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Practical caseIAS 7L3 · Advanced

Investments, overdraft and cash trapped abroad: composition and reconciliation of cash

4 documents9 tasks≈ 70 min
0 / 12 items completed
Standards
IAS 7 — Statement of Cash Flows
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

The Solvanne group (fictitious entity) is preparing the cash note of its 20X8 financial statements. Its subsidiary in Valtaria (fictitious country) holds local currency cash subject to exchange controls. You analyse the balances at 31 December 20X8.

Your assignment

Qualify each balance, assess the overdraft and the availability of the subsidiary's balances, determine closing cash, the exchange effect and the reconciliation, present the entry for the short-term bank loan and its effect, prepare the note and conclude. One item of information is missing: document your assumption.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

4 documents: open each one to read it.

Document 1Table

Bank confirmations and statements at 31 December 20X8

At 31 December 20X8 (EUR): cash on hand 6,000; demand deposits 842,000 (including the Valtaria subsidiary); term deposit placed on 15 November 20X8 maturing on 15 February 20X9, without any significant early withdrawal penalty, 300,000; term deposit placed on 1 December 20X7 maturing on 31 January 20X9, 250,000; listed shares held by treasury 180,000; money market fund with daily liquidity and a very stable value according to its prospectus 120,000; overdraft repayable on demand 95,000, the account having been alternately in credit and overdrawn every month of the year; six-month short-term bank loan drawn on 20 December 20X8 200,000.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Cash on hand€6,000.00
Demand deposits€842,000.00
Term deposit placed on 15 November 20X8€300,000.00
Term deposit placed on 1 December 20X7€250,000.00
Listed shares€180,000.00
Money market fund with daily liquidity€120,000.00
Bank overdraft€95,000.00
Six-month short-term bank loan€200,000.00
Subsidiary's cash at the beginning (translated)€150,000.00
Subsidiary's cash at the end (translated)€210,000.00
Subsidiary's net cash flows translated at the rates at the dates of the flows€28,000.00
Cash and cash equivalents at 1 January 20X8€905,000.00
Net increase per the draft statement€236,000.00
Annual subscription for the terminals€1,200.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort4

  • Bank confirmations and statements at 31 December 20X8

  • Note on the Valtaria subsidiary

  • Group treasury note

  • Bank's commercial offer

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      9 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Qualify each balance: cash, cash equivalent, excluded investment or financing.

      2. Task 2Professional judgement

        Is the overdraft part of cash management? Are the subsidiary's balances available?

      3. Task 3Calculation

        Determine the qualifying and excluded investments and closing cash.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Determine the qualifying and excluded investments and closing cash.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Closing cash and cash equivalents

      4. Task 4Calculation

        Compute the effect of exchange rate changes on cash.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the effect of exchange rate changes on cash.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Reconcile opening and closing cash.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Reconcile opening and closing cash.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Reconciliation difference

      6. Task 6Journal entries

        Present the entry for the short-term bank loan.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      7. Task 7Effects on the financial statements

        What is its effect on the financial statements and on cash in the statement?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Analysis

        Prepare the note: components, reconciliation with the statement of financial position, policy, unavailable balances.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Prepare the note: components, reconciliation with the statement of financial position, policy, unavailable balances.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 12).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 7 §6
      • IAS 7 §7
      • IAS 7 §8
      • IAS 7 §9
      • IAS 7 §26
      • IAS 7 §27
      • IAS 7 §28
      • IAS 7 §45
      • IAS 7 §46
      • IAS 7 §48
      • IAS 7 §49
      • IAS 7 §50