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IAS 7Case studies (Step 3 of 5)

Case study

Step 3 of 5

Version of this content

IAS 7 Statement of Cash Flows — wording before IFRS 18Applicable today

Applies to annual periods beginning before January 1, 2027.

Practical caseIAS 7L2 · Intermediate

An industrial SME's statement under the indirect method: sale of a machine, provisions and tax

5 documents12 tasks≈ 80 min
0 / 19 items completed
Standards
IAS 7 — Statement of Cash Flows
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Fonderie Ardanel SA (fictitious entity) manufactures castings. It prepares its 20X5 statement of cash flows under the indirect method. You prepare the worksheet from the comparative statements, the statement of profit or loss and the notes.

Your assignment

Determine the net operating cash flow under the indirect method, the investing and financing cash flows, reconcile cash, present the entries for the underlying transactions and their effect, then conclude.

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.

Intermediate level: help remains available, on demand.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 5 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 19) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

5 documents: open each one to read it.

Document 1Table

Comparative statements of financial position (extracts)

At 31 December 20X4 then 20X5 (EUR): trade receivables 1,120,000 and 1,210,000; inventories 860,000 and 815,000; operating trade payables 640,000 and 600,000; property, plant and equipment 3,200,000 and 3,450,000; borrowings 900,000 and 780,000; interest payable 12,000 and 18,000; current tax payable 60,000 and 70,000; cash and cash equivalents 214,000 and 300,000. The amount owed to the supplier of the milling machine is in other payables, not in operating trade payables.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Trade receivables at the beginning€1,120,000.00
Trade receivables at the end€1,210,000.00
Inventories at the beginning€860,000.00
Inventories at the end€815,000.00
Operating trade payables at the beginning€640,000.00
Operating trade payables at the end€600,000.00
Property, plant and equipment at the beginning€3,200,000.00
Property, plant and equipment at the end€3,450,000.00
Borrowings at the beginning€900,000.00
Borrowings at the end€780,000.00
Interest payable at the beginning€12,000.00
Interest payable at the end€18,000.00
Current tax payable at the beginning€60,000.00
Current tax payable at the end€70,000.00
Cash and cash equivalents at the beginning€214,000.00
Cash and cash equivalents at the end€300,000.00
Profit before tax€620,000.00
Depreciation€280,000.00
Net charge to provisions€45,000.00
Gain on disposal of the press€35,000.00
Interest expense€54,000.00
Current tax expense€150,000.00
Cost of the press sold€400,000.00
Accumulated depreciation of the press sold€310,000.00
Carrying amount of the press sold€90,000.00
Milling machine delivered and unpaid at year end€70,000.00
Dividend declared and paid€60,000.00
Amount of the quotation€1,100,000.00

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 sort5

  • Comparative statements of financial position (extracts)

  • Statement of profit or loss 20X5 (extracts)

  • Fixed asset schedule

  • Minutes of the general meeting

  • Quotation for extending the workshop

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      12 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 adjustments of the indirect method and the classification methods to apply.

      2. Task 2Calculation

        Compute the cash effect of the changes in working capital.

        Calculator

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

        Part 1 · Calculation

        Compute the cash effect of the changes in working capital.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Change in trade payables

      3. Task 3Calculation

        Compute the non-cash items.

        Calculator

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

        Part 1 · Calculation

        Compute the non-cash items.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Compute the interest paid.

        Calculator

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

        Part 1 · Calculation

        Compute the interest paid.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Compute the tax paid.

        Calculator

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

        Part 1 · Calculation

        Compute the tax paid.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Calculation

        Determine the cash generated from operations and the net operating cash flow.

        Calculator

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

        Part 1 · Calculation

        Determine the cash generated from operations and the net operating cash flow.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Net cash from operating activities

      7. Task 7Calculation

        Compute the proceeds from the sale of the press.

        Calculator

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

        Part 1 · Calculation

        Compute the proceeds from the sale of the press.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Calculation

        Compute the cash paid to purchase property, plant and equipment.

        Calculator

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

        Part 1 · Calculation

        Compute the cash paid to purchase property, plant and equipment.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Analysis

        Assemble the statement and reconcile cash.

        Calculator

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

        Part 1 · Calculation

        Assemble the statement and reconcile cash.

        1. €
        2. €
        3. €
        4. €
        5. €

        Checks

        • 0 / 5 steps entered
        • Amounts readable

        Result: Net change in cash

      10. Task 10Journal entries

        Present the entries for the disposal, the payment of tax and interest, the purchase and the dividend.

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 5

        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

        3. Line 3

        4. Line 4

        TotalsDebit0Credit0

        Calculator

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

        Part 2 · Journal entry · Journal entries

        Entry 2 of 5

        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 5

        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 5

        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 5 · Journal entry · Journal entries

        Entry 5 of 5

        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

      11. Task 11Effects on the financial statements

        What is their combined 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. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      12. Task 12Conclusion

        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 / 19).

      Document this file

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

      Normative references

      • IAS 7 §14
      • IAS 7 §16
      • IAS 7 §18
      • IAS 7 §20
      • IAS 7 §31
      • IAS 7 §33
      • IAS 7 §34
      • IAS 7 §35