Paper 3 · June 2019 · Statement of Cash Flows

Medals Limited's inventory was $400 000 at 31 December 2017 and $470 000 at 31 December 2018. What was the increase in inventory during the year, as used in preparing the statement of cash flows?

Model answer

$70000

Also accepted: 70000, $70 000, 70 000

Explanation

Increase in inventory = closing inventory - opening inventory = $470 000 - $400 000 = $70 000. This increase represents cash tied up in inventory and is deducted in arriving at cash generated from operations.

Derived from ZIMSEC Accounting Paper 3, June 2019, Q2

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More questions from this paper

Which of the following is a genuine benefit of preparing a statement of cash flows, in addition to the income statement and statement of financial position?
Mr Reedy sells goods at a mark-up of 25% on cost. Goods with a selling price of $6 250 were returned by a customer shortly after the year end, having been invoiced and delivered to the customer before the year end. What was the cost price of these returned goods?
Goods held in inventory had a cost of $7 500. They were damaged and could only be sold for $1 500 after incurring repair costs of $150. At what amount should these goods be included in inventory, applying the lower of cost and net realisable value rule?
Goods with a selling price of $12 500 (cost $10 000, based on Mr Reedy's 25% mark-up on cost) were sent to a customer on a sale or return basis before the year end. The customer had not yet indicated whether he would keep the goods. How should these goods be treated in the seller's closing inventory at the year end?
Unused stationery costing $3 500 had mistakenly been included in the physical count of trading inventory at 10 April 2016. How should this amount be treated when calculating the correct trading inventory figure?

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