Question
Wyvern Logistics had the following cash movements in 2026. Its accounting policies under IAS 7 are: interest paid and income taxes paid are operating; dividends received are investing; dividends paid are financing.
| Cash movement | $ |
|---|
| Cash received from customers | 820,000 |
| Cash paid to suppliers and employees | 610,000 |
| Interest paid on the bank loan | 18,000 |
| Income taxes paid | 34,000 |
| Dividends received from a minority shareholding | 6,000 |
| Purchase of new delivery equipment | 150,000 |
| Proceeds from the sale of an old van | 12,000 |
| Proceeds from an issue of shares | 100,000 |
| Repayment of part of the bank loan | 40,000 |
| Dividends paid to shareholders | 25,000 |
| Purchase of a two-month treasury bill (held as a cash equivalent) | 20,000 |
Required: give each total as a positive number for a net inflow and a negative number for a net outflow.
- Operating Activities — net cash from operating activities.
- Investing Activities — net cash from investing activities.
- Financing Activities — net cash from financing activities.
- Net Change — the net increase or decrease in cash and cash equivalents.
Statements in this challenge
- Operating ActivitiesNumeric Answer
- Investing ActivitiesNumeric Answer
- Financing ActivitiesNumeric Answer
- Net ChangeNumeric Answer
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 7 — Statement of Cash Flows
The direct method reports actual operating cash receipts and payments by category rather than reconciling from profit. Each line is built by converting an accrual figure to cash — revenue adjusted for the movement in receivables, purchases adjusted for the movements in inventory and payables, and so on.
Common mistakes
- Reporting the accrual amount unchanged because the related working-capital account happened to be given.
- Omitting a supporting schedule when the question asks for the workings behind each converted line.
- Producing operating cash flow that does not agree with what the indirect method would give — the two must reconcile.
Further readingDirect vs indirect method cash flow