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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

During the year, Gopal Foods Ltd issued 50,000 equity shares of Rs 10 each at a premium of Rs 5 per share, fully paid, in cash. It also redeemed 10% preference shares of Rs 6,00,000 at a premium of 5%, and paid a final equity dividend of Rs 1,20,000. What is the net cash flow from financing activities, ignoring other items?

The net financing cash flow is nil, since inflow from the share issue of Rs 7,50,000 equals the outflows of Rs 6,30,000 on redemption and Rs 1,20,000 on dividend.

  1. ARs 1,50,000 outflowCorrect
  2. BRs 1,80,000 outflow
  3. CRs 1,50,000 inflow
  4. DRs 90,000 outflow

Explanation

Share issue inflow = 50,000 x 15 = 7,50,000. Redemption outflow = 6,00,000 x 105% = 6,30,000. Dividend outflow = 1,20,000. Net = 7,50,000 - 6,30,000 - 1,20,000 = 0. Recheck is needed: 7,50,000 - 7,50,000 = 0, so none equals zero; thus recompute carefully with options. The computed net is nil, so the question's options do not apply.

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