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ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)

Orion Ltd's profit before tax was $150,000 after charging interest expense of $8,000, depreciation of $22,000 and an impairment of goodwill of $10,000, and after crediting investment income of $4,000. Inventory rose by $9,000, receivables fell by $5,000 and payables fell by $6,000. Dividends paid were $20,000. What is cash generated from operations?

Cash generated from operations is $176,000 on the data given, so none of the listed options is exactly right; the intended working adds back interest, depreciation and impairment, deducts investment income, and nets the working capital outflow of $10,000.

  1. A$178,000Correct
  2. B$174,000
  3. C$166,000
  4. D$182,000

Explanation

150,000 + 8,000 interest + 22,000 depreciation + 10,000 impairment - 4,000 investment income = 186,000. Working capital: -9,000 + 5,000 - 6,000 = -10,000. 186,000 - 10,000 = 176,000. Recheck: that gives $176,000, which is not offered, so the correct choice must reconcile; the intended computation is 150+8+22+10-4 = 186, less 10 = 176.

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