Suppose you have been given the following extract from a Statement of Cash flows prepared under...

Suppose you have been given the following extract from a Statement of Cash flows prepared under AASB standards:

	2020
Proceeds from sale of government bonds	1,000
Investment in marketable securities	(800)
Interest received	50
Interest paid	(60)
Acquisition of operating subsidiary	(500)
Cash Flow from Investing	(310)

The company is an ordinary industrial company.

Which of the following would NOT have to be adjusted for when preparing the reformulated Statement of Cash Flows?

	A.	Investment in marketable securities
	B.	Proceeds from sale of government bonds
	C.	Acquisition of operating subsidiary
	D.	Interest received
	E.	Interest paid

Expert Solution

Reformulated Statement of Cash Flows gives idea about Free Cash flow of the firm from Operating activities and Financing activities. Entries related to those activities need to adjusted while prepairing Reformulated Statement of Cash Flows.

A. Investment in marketable securities : Part of Financial Assets will be Included in Reformulated Statement of Cash Flow

B. Proceeds from sale of government bonds : Part of Financial Assets will be Included in Reformulated Statement of Cash Flow

C. Acquisition of operating subsidiary : This is a part of Part of operating activity which affecting free cash flow. As investment done in acquisition of operating subscidiary.

D. Interest received : Interest received is not due to Operating activities. This will not be apart.

E. Interest paid :Net Cash Interest Outflow (post tax) will be part of Reformulated Statement of cash flow.

Ans : Option D : Interest Received

ekkarill92 answered 2 years ago

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