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Practical caseIAS 7L3 · Advanced

Interest, dividends and taxes: classification by entity status, capitalised interest and net presentation

5 documents10 tasks≈ 70 min
0 / 15 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  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn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

Bellastre Hôtels SA (fictitious entity) operates hotels, is building a new property and manages residences on behalf of owners. You prepare the interest, dividends and tax lines of its 20X8 statement and the presentation of the managed rents and of the bond portfolio.

Your assignment

Compute interest paid, dividends paid and taxes paid, the net cash flow of the managed rents, classify these cash flows by applying the rules applicable from 2027 to the status of the entity, assess the finance director's proposal and the presentation of the bonds, present the entries and their effect, then the disclosures.

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

5 documents: open each one to read it.

Document 1Table

Balances and expenses for 20X8

Year 20X8 (EUR): interest payable 25,000 at the beginning and 35,000 at the end; finance costs in profit or loss 180,000, of which unwinding of the discount on a restoration provision of 8,000; interest capitalised in the cost of the hotel under construction, paid in the year, 60,000; dividends payable 40,000 at the beginning and 70,000 at the end; dividends declared 300,000, of which 50,000 settled in new shares at the request of shareholders; current tax payable 90,000 at the beginning and 110,000 at the end; current tax expense 260,000.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Interest payable at the beginning€25,000.00
Finance costs recognised in profit or loss€180,000.00
Of which unwinding of a provision discount€8,000.00
Interest capitalised in the cost of the hotel under construction€60,000.00
Interest payable at the end€35,000.00
Dividends payable at the beginning€40,000.00
Dividends declared in the year€300,000.00
Dividends payable at the end€70,000.00
Dividends settled in shares€50,000.00
Current tax payable at the beginning€90,000.00
Current tax expense€260,000.00
Current tax payable at the end€110,000.00
Tax paid on the gain on the land€40,000.00
Rents collected on behalf of the owners€1,450,000.00
Rents remitted to the owners€1,390,000.00
Purchases of bonds€900,000.00
Sales of bonds€650,000.00
Interest received on the bond portfolio€24,000.00
Average occupancy rate74%

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 sort5

  • Balances and expenses for 20X8

  • Tax assessment on the sale of the land

  • Management mandates and bond portfolio

  • Minutes of the audit committee

  • Occupancy statistics

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      10 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

        Identify the items that separate expenses from amounts paid.

      2. Task 2Calculation

        Compute total interest paid and the portion settled through interest payable.

        Calculator

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

        Part 1 · Calculation

        Compute total interest paid and the portion settled through interest payable.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Interest paid through interest payable

      3. Task 3Calculation

        Compute the dividends paid.

        Calculator

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

        Part 1 · Calculation

        Compute the dividends paid.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Compute the tax paid and its allocation.

        Calculator

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

        Part 1 · Calculation

        Compute the tax paid and its allocation.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Taxes paid classified as operating

      5. Task 5Calculation

        Compute the net cash flow of the owners' rents.

        Calculator

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

        Part 1 · Calculation

        Compute the net cash flow of the owners' rents.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Professional judgement

        Classify these cash flows, assess the finance director's proposal and the presentation of the bonds.

      7. Task 7Journal entries

        Present the payment entries.

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 4

        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

        Calculator

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

        Part 2 · Journal entry · Journal entries

        Entry 2 of 4

        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

        Calculator

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

        Part 3 · Journal entry · Journal entries

        Entry 3 of 4

        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

        Calculator

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

        Part 4 · Journal entry · Journal entries

        Entry 4 of 4

        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

      8. Task 8Effects on the financial statements

        What is their effect on the financial statements?

        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

      9. Task 9Analysis

        Which disclosures are required?

      10. Task 10Conclusion

        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 / 15).

      Document this file

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

      Normative references

      • IAS 7 §10
      • IAS 7 §11
      • IAS 7 §21
      • IAS 7 §22
      • IAS 7 §23
      • IAS 7 §23A
      • IAS 7 §31
      • IAS 7 §32
      • IAS 7 §33A
      • IAS 7 §34A
      • IAS 7 §34B
      • IAS 7 §34C
      • IAS 7 §34D
      • IAS 7 §35
      • IAS 7 §36