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Chapter 22

Example 1

Cash generated from operations

Extracts from the financial statements of Danny show the following:

20X4
Statement of profit or loss $

Profit from operations 7,800
Finance costs (1,300)

Investment income 400
———

Profit before tax 6,900
Income tax expense (1,680)

———
Profit for the year 5,220

———

Statement of financial position 20X4 20X3

$ $

Current assets
Inventory 1,200 1,150
Receivables 1,760 1,820

Current liabilities

Payables 1,380 1,200
Additional information

During 20X4 depreciation of $1,100 was charged, and Danny sold an item of
plant at a profit of $600.

Calculate Danny’s cash generated from operations for 20X4 using the
indirect method.

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