Management Accounting Practice Questions

This document contains practice questions and solutions for a management accounting assignment. Topics covered include analyzing the impact of depreciation on net income and cash flows, understanding adjustments in the statement of cash flows, and interpreting financial statements. It also delves into foreign currency translation and factoring receivables.

Running head: MANAGEMENT ACCOUNTING
Management accounting
Name of the student
Name of the university
Author note

2MANAGEMENT ACCOUNTING
Table of Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................3
Question 3..................................................................................................................................3
Question 4..................................................................................................................................3
Question 5..................................................................................................................................3
Question 6..................................................................................................................................3
Question 7..................................................................................................................................4
Question 8..................................................................................................................................4
Question 9..................................................................................................................................4
Question 10................................................................................................................................4
Question 11................................................................................................................................4
Question 12................................................................................................................................4
Question 13................................................................................................................................5
Question 14................................................................................................................................5
Question 15................................................................................................................................5
Question 16................................................................................................................................5
Question 17................................................................................................................................6
Question 18................................................................................................................................7

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Question 1
c. the higher book depreciation $ 100 million will lower pre-tax book income by $ 100
million. It will lower deferred tax expense by $ 35 million but will not affect current taxes.
Thus, the net income will be lower by $ 65 million. The indirect cash flows will start with $
65 million less net income but the higher depreciation of $ 100 million will be added back
and there will be a smaller add back of deferred taxes of $ 35. This will leave the operating
cash flows unchanged.
Question 2
b. the impairment losses are added back because they lower net income but do not result in
any operating payments
Question 3
c. Cemex consolidates equity accounted investees. However, it does not own 100% of those
investees. Therefore, it has to subtract the share of profits it does not own
Question 4
b. It is a gain included in net income that is not an operating inflow. Instead, it is included in
investing inflows.
Question 5
c. The company has disclosed payments for financial items in a separate line item on the cash
flow statement.

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Question 6
a. The company did not pay taxes in cash
Question 7
b. Cemex decreasing the need for working capital over the year
Question 8
Adjustments for receivable in negative are stating that collection from debtors is reduced over
the years.
Question 9
Adjustments for trade payables in positive are stating that payment to the creditor is increased
over the years.
Question 10
The large increase in the adjustment in 2016 as compared to 2015 cannot be sustained going
forward as the adjustments are for large amounts that will have large impact on the statement
and performance of the company.
Increase in interest rate will – (i) increase the finance cost (ii) reduce the net profit (iii) reduce
the cash flow from financing activities
Question 11
11.1 Impairment losses on the long-lived assets – 2,516
11.2 Results on the disposal of assets – 5,957
11.3 Restructuring cost – 778

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Question 12
c. Both cost of sales and operating expenses
Question 13
EBITDA 50,453
Calculation of EBITDA
Net income from continuing
operations 14183 854 -5770
Addition
Depreciation and amortization 16147 14865 13703
Interest / financial items 17027 21002 18952
Income taxes 3096 2328 3920
Total expenses 36270 38195 36575
EBITDA 50453 39049 30805
Question 14
a. Cost of sales
b. Distribution expenses
c. Cost of sales
Question 15
Discontinued operations – impact of the discontinued operations are not significant on the
past and current revenues and the statement of operation were reclassified to single line item
named as ‘discontinued operations’.
Other disposable items – in case of foreign investment disposal, the earnings are reversed.
Further, the investment is identified as the item available for sale at the fair values and the
alterations in valuations are transacted under the other comprehensive loss till the disposal.

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Question 16
16.1 Cemex will receive PS 7500
Calculation –
Value of surrendered control = PS 10,000
Reserve = PS 2000
Remaining = PS 8000
Less: Discount = PS 500
Receivables = PS 7500
16.2 Journal entries
Particular Debit Credit
Cash a/c Dr PS 8,000
To Factored invoiced sold PS 8,000
Cash a/c Dr (2000 – 500) PS 1,500
Fee a/c Dr PS 500
Factored invoice sold PS 8000
To Amount receivable PS 10,000
Factored invoice sold a/c Dr PS 8,000
Fee a/c Dr PS 500
To Factored invoice reserves PS 8,500

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Question 17
Foreign currency translation represents –
 The results from translation of financial statements for the foreign subsidiaries
 The amount is generated through the foreign exchange fluctuations on notional
amount of the debt
 The fluctuations in foreign exchange that arises from the balances with the related
parties in the foreign currencies of long term nature of investment
Question 18
These large amounts of adjustment will reduce the profit in the income statement, reduce the
income in the comprehensive income, increase the liabilities in balance sheet and increase the
amount in the cash flow statement from the financing activities.