Question

Q1)The following information summarizes all cash-related transactions for BBB.Ltd in 2018:
1. BBB. Ltd had $25,000 cash in its Bank account at the start of 2018.
2. On 1 January 2018 the company took out a $75,000 loan from Arab Bank. The loan
has an annual interest rate of 15%. The interest on the loan was paid on time in 2018.
BBB .Ltd sells its products to customers on credit (the agreed credit term is 30 days).
During 2018, it received $850,000 from customers in respect of sales of inventory
made to them.
3. BBB. Ltd purchased components for its products on credit (the agreed credit term is
also 30 days). During 2018, it paid $550,000 to suppliers for purchases of components.
4. A new production line was acquired in the year at a cost of $120,000.
5. Salaries paid for the year amounted to $40,000. Various other operating expenses paid
for by the business amounted to $75,000 for the year.
6. $25,000 was paid to shareholders as dividends.
7. Last year’s tax liability to BBB.Ltd of $22,000 was settled in 2018.
Required:
Prepare BBB.Ltd’s statement of cash flows for the year to 31 December 2018 using the
direct method.

Q2)The following information had been prepared for XYZ Limited for the year to 31 December
2019.

Activity Level	Fixed Budget US$	Actual Costs US$
Direct Material	100,000	115,00
Direct Labor	150,000	185,000
Variable Overhead	50,000	55,000
Total Variable Costs	300,000	355,000
Fixed Cost	60,000	65,000
Total Costs	360,000	420,000

Complete the following table below assumes that the XYZ Company adapts the flexible
budget method based on 120 % of its operating activities costs. Indicate whether the variance
is a favorable or adverse under each budgeting system (fixed and flexible budget)

(1) (2) (3) (4) (5) (6) (7)

Activity Level Fixed Budget
Flexible
Budget
(120%)

Actual Costs Fixed-
Actual

Favorable/
Adverse

Flexible-
Actual

Favorable
/Adverse

US$ US$ US$ US$ US$

Direct Materials 100,000 115,000
Direct Labor 150,000 185,000
Variables Overhead 50,000 55,000
Total Variables Costs 300,000 355,000
Fixed Costs 60,000 65,000
Total Costs 360,000 420,000

Answer 1

BBB LTD.  

CASH FLOW STATEMENT

(for the year ended 31st December,2018)

Amount in $

A. Cash flow from opearting activities (using direct method)

Received from customer for sale 850,000

less : paid to supplier    (550,000)

less : salaries paid    (40,000)

less : other operating expenses (75,000)

less : interest paid on loan (11250)

less : tax paid (22,000)

Net cash inflow from opearting activities (A) 151750

B. cash flow from investing activities

purchase of product line (120,000)

Net Cash Outflow From Investing Activities(B)    (120,000)

C. Cash flow from financing Activities

Loan Taken 75,000

Dividend paid ( 25000)

Net Cash Inflow From Financing Activities(C)    50,000

__________________________________________________________________________

Net increase / ( Decrease ) in Cash ( A+B+C) 81750

ADD : Cash At the Beginning of the year 25000

Cash At the end of year 106750

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