Cash flow- Operating

Practical Accounting (2018)

Members:
David, Eugene
Macaraeg, Albert
Nicart, Don Joseph II
Porto, Patrick Ivan

43-1:
Seawell Company provided the following data for the preparation of the statement of cash flows for the current year:

Dividends declared and paid 800,000

Net cash used in investing activities (2,500,000)
Net cash used in financing activities (800,000)

December 31 January 1
Cash 2,100,000 1,200,000
Other assets 21,000,000 22,700,000
Liabilities 10,500,000 11,700,000
Share Capital 2,000,000 2,000,000
Retained Earnings 10,600,000 10,200,000

What is the net cash provided by operating activities?

a. 4,200,000
b. 2,400,000
c. 4,500,000
d. 5,400,000
Answer: A
Solution:

Cash- January 1 1,200,000

Net cash provided by operating activities (SQUEEZE) 4,200,000

Net cash used in investing activities (2,500,000)

Net cash used in financing activities (800,000)

Cash- December 31 2,100,000

43-2:
Sun Company provided the following data for the preparation of the statement of cash flows for the current year:

Increase in accounts payable 250,000

Decrease in income tax payable (300,000)
Depreciation (170,000)
Net income 1,000,000
Gain on sale of equipment (440,000)
Loss on sale of building 210,000

What amount should be reported as net cash provided by operating activities?

a. 780,000
b. 700,000
c. 880,000
d. 550,000
Answer: D
Solution:

Net income 250,000

Increase in accounts payable (300,000)

Decrease in income tax payable (170,000)

Depreciation 1,000,000

Gain on sale of equipment (440,000)

Loss on sale of building 210,000

Net cash provided by operating activities 550,000

43-3:
Kersley company reported net income of P7,500,000 for the current year.
The following account balances are provided for the preparation of the statement of cash flow for the year
January 1 December 31
Accounts receivable 1,150,000 1,450,000
Allowance for doubtful accounts 40,000 50,000
Prepaid rent expense 620,000 410,000
Accounts payable 970,000 1,120,000

What is the net cash provided by operating activities?

a. 7,270,000
b. 7,430,000
c. 7,550,000
d. 7,570,000
Answer: D
Solution:

Net income
7,500,000
Increase in net accounts receivable (1,400,000-1,110,000)
(290,000)
Decrease in prepaid rent expense
210,000
Increase in accounts payable
150,000
Net cash provided by operating activities
7,570,000

1-Jan 31-Dec
Accounts receivable
1,150,000 1,450,000
 Allowance for doubtful accounts
(40,000) (50,000)

Net accounts receivable 1,110,000 1,400,000

43-4:
Brown company reported the following information for the current year:
Sales 2,800,000
Cost of goods sold 1,000,000
Distribution cost 400,000
Administrative expense 350,000
Depreciation expense 250,000
Interest expense 80,000
Income tax expense 280,000

All sales were made cash for cash and all expenses other than depreciation and bond premium amortization of
20,000 were paid in cash
All current assets and current liabilities remained unchanged

What is the net cash provided by operating activities for the current year?

a. 440,000
b. 690,000
c. 670,000
d. 710,000
Answer: C
Solution:

Sales
2,800,000
Cost of goods sold
(1,000,000)
Distribution cost
(400,000)
Administrative expense
(350,000)
Interest paid
(100,000)
Income tax expense
(280,000)
Net cash provided by operating activities
670,000

Interest expense
80,000
Premium amortization
20,000
Interest paid
100,000

43-5:
Mahogany company had the following account balances for the current year:
 December 31 January 1
Accounts payable 500,000 700,000
Inventory 300,000 450,000
Accounts receivable 800,000 750,000

All purchases of inventory were on account.

The entity provided the following income statement information for the current year:

Revenue 9,800,000
Cost of goods sold (4,000,000)
Other expenses (1,300,000)
Depreciation expense (1,000,000)
Loss on sale of equipment (100,000)
Net income 3,400,000

What is the net cash provided by operating activies?

a. 4,500,000
b. 4,400,000
c. 4,600,000
d. 4,300,000
Answer: B
Solution:
Net income
3,400,000
Depreciation
1,000,000
Loss on sale of equipment
100,000
Decrease in accounts payable
(200,000)
Decrease in inventory
150,000
Increase in accounts receivable
(50,000)
Net cash provided by operating activities
4,400,000

43-6:
Champaca Company provided the following information for the current year:

Net income for the current year 750,000

Sales revenue 4,500,000
Cost of goods sold, except depreciation 2,750,000
Depreciation expense 500,000
Amortization of intangible assets 200,000
Interest expense on bank note payable 300,000
Dividends paid during the year 350,000

January 1 December 31
Accounts receivable 220,000 150,000
Inventory 350,000 400,000
Accounts payable 475,000 520,000
Interest payable 100,000 85,000
Note payable - bank 2,500,000 3,000,000

Under the indirect method, what amount should be reported as net cash provided by operating activities?

a.1,500,000
b.1,515,000
c.1,450,000
d.2,020,000
Answer: D
Solution:

Net income
700,000
Depreciation
500,000
Amortization
200,000
Decrease in account receivable
70,000
Increase in inventory
(50,000)
Increase in accounts payable
45,000
Decrease in interest payable
(15,000)
Net cash flow from operating activities
1,500,000

43-7:
Metro Company reported net income of P7,500,000 for the current year.
Changes in certain accounts during the year are:
Investment in Videogold stock carried on the equity basis 550,000 increase
Accumulated depreciation, caused by major repair
on project equipment 210,000 decrease
Unearned interest income 50,000 decrease
Premium on bonds payable 140,000 decrease
Deferred tax liability 180,000 increase
What is the net cash provided by operating activities?
a. 7,490,000
b. 7,220,000
c. 6,940,000
d. 7,040,000
Answer: C
Solution:

Net income 7,500,000

Increase in investment carried at equity, (550,000)

representing shares in net income of
investee (50,000)

Decrease in unearned interest income (140,000)

Amortization of premium on bonds payable 180,000

 Increase in deffered tax liability 6,940,000

43-8:
Albay Company provided the following information for the current year:
Accounts receivable, January 1, net of allowance of 100,000 1,200,000
Accounts receivable, December 31, net of allowance of 300,000 1,600,000
Sales of the year – all on credit 8,000,000
Uncollectible accounts written off during the year 50,000
Bad debts expense for the year 250,000
Cash expenses for the year 5,250,000
Net income for the year 2,500,000
What is the net cash provided by operating activities?
a. 2,100,000
b. 2,350,000
c. 2,900,000
d. 2,150,000
Answer: A
Solution:

Indirect method :

Net income 2,500,000

Inc. in accounts receivable (1600000-1200000) (400,000)

Net cash provided by operating activities 2,100,000

Direct method:

A/R Jan 1 (1200000+100000) 1,300,000

Sales 8,000,000

Total 9,300,000

A/R Dec 31 (1600000+300000) (1,900,000)

Accounts written off (50,000)

Collection from customers 7,350,000

Cash expenses (5,250,000)

Net cash provided by operating activities 2,100,000

43-9:
Lance Company provided the following data for the current year:
Sales 7,500,000
Cost of goods sold (4,000,000)
Expenses paid (1,100,000)
Depreciation ( 400,000)
Net income 2,000,000
Increase in accounts receivable 500,000
Decrease in inventory 1,000,000
Decrease in accounts payable 600,000
1. What amount of cash was received from the customers?
a. 8,000,000
b. 7,000,000
c. 6,500,000
d. 5,500,000
Answer: B
Solution:

Sales 7,500,000

Increase in A/R (500,000)

Cash received from customers 7,000,000

2. What amount of cash was paid to the suppliers?

a. 3,000,000
b. 2,400,000
c. 4,000,000
d. 3,600,000
Answer: D
Solution:

Purchases 3,000,000

Decrease in inventory 1,000,000

COGS 4,000,000

Purchases 3,000,000

Decrease in A/P 600,000

Payment to suppliers 3,600,000

3. What is the net cash provided by operating activities?

a. 2,000,000
b. 2,400,000
c. 2,300,000
d. 1,700,000
Answer: C
Solution:
 Direct method:

Cash received from costumers 7,000,000

Payments to
suppliers (3,600,000)

Expenses paid (1,100,000)

Net cash provided by operating activities 2,300,000

Indirect method:

Net income 2,000,000

Depreciation 4,000,000

Increase in A/R (500,000)

Decrease in
inventory 1,000,000

Decrease in A/P (600,000)

Net cash provided by operating activities 2,300,000

43-10
Mazda Company reported the following information:
2018 2017
Income tax payable 1,750,000 1,400,000
Deferred tax liability 210,000 140,000
Income tax expense 2,000,000
What amount of income tax was paid in 2018?
a. 2,420,000
b. 1,930,000
c. 1,650,000
d. 1,580,000
Answer: D
Solution:

Income tax expense for 2018 2,000,000

Income tax payable - 2017 1,400,000

Income tax payable - 2018 (1,750,000)

Deferred tax liability - 2017 140,000

Deferred tax liability - 2018 (210,000)

Cash paid for income tax in 2018 1,580,000

43-11:
Claire Company reported the following data in relation to interest expense:
 2017 2018
Interest expense 1,200,000 1,500,000
Accrued interest payable 700,000 600,000
Interest costs related to construction in progress are capitalized as incurred. The entity capitalized P300,000 and
P250,000 of interest costs during 2018 and 2017, respectively.

What total amount of interest was paid in 2018 including the amount capitalized in progress?
a. 1,600,000
b. 1,400,000
c. 1,300,000
d. 1,900,000
Answer: D
Solution:

Interest expense in 2018 included in profit or loss

1,500,000
Accrued interest payable – December 31,
2017 700,000
Accrued interest payable – December 31,
2018 (600,000)
Interest paid in 2018 included in profit or
loss 1,600,000

Interest paid in 2018 included in profit or

loss 1,600,000
Interest paid in 2018 and capitalized
700,000
Total interest paid in 2018
1,900,000

43-12:
Zeus company reported provided the following information for the current year:

Net income 5,000,000

Amortization of patent 45,000
Depreciation of property,plant and equipment 1,650,000
Long Term debt:
Bond discount amortization 65,000
Interest paid 900,000
Unrealized loss on financial asset held for trading 100,000
Unrealized loss on financial asset at fair value
 through other comprehensive income 400,000

What is the net cash provided by operating activities in the statement of cash flows for the current year?

a. 6,760,000
b. 6,630,000
c. 6,730,000
d. 6,860,000
Answer: D
Solution:

Net income
5,000,000
Amortization of
patent 45,000
Depreciation
1,650,000
Discount
amortization 65,000

Unrealized loss on financial asset held for trading 100,000

Net cash provided by operating activities 6,860,000

43-13:
Blacktown Company had the following account balances for the current year:
December 31 January 1
Accounts payable 500,000 650,000
Inventory 300,000 250,000
Accounts receivable 800,000 900,000
Prepaid expenses 400,000 600,000
 All purchases of inventory were on account
 Depreciation during the year was P900,000
 Equipment was sold during the year at a gain of P300,000
The entity provided the following cash flows from the current year:
Cash collected from costumers 9,500,000
Cash paid for inventory (4,100,000)
Cash paid for other expenses (1,400,000)
Cash flow from operations 4,000,000
What is the net income for the current year?
a. 3,300,000
b. 3,400,000
c. 3,000,000
d. 3,900,000
Answer: A
Solution:

Net income (SQUUEEZE) 3,300,000

 Decrease in A/P (150,000)

Increase in inventory (50,000)

Decrease in A/R 100,000

Decrease on prepaid expenses 200,000

Depreciation 900,000

Gain on sale of equipment (300,000)

Cash flow from operations 4,000,000

43-14:
Flax Company provided the following data for the current year:
Working capital – Jan 1 1,700,000
Working capital provided by operations 900,000
Purchase of plant asset for cash 600,000
Short-term borrowings 950,000
Payments on short-term borrowing 500,000
Cash dividends paid on ordinary share 250,000
What was the working capital on December 31?
a. 2,200,000
b. 1,750,000
c. 2,000,000
d. 2,450,000
Answer: B
Solution:

Working capital - Jan 1 1,700,000

Working capital provided by operations 900,000

Purchase of plant asset for cash (600,000)

Cash dividends paid (250,000)

Working capital - Dec 31 1,750,000

43-15:
At the beginning of the current year, Darwin Company reported cash balances of P8,000,000. During the current
year, the entity disclosed the following changes in certain amounts:
Accounts receivable 2,000,000 increase
Inventory 1,500,000 decrease
Accounts payable 3,000,000 decrease
Total sales and cost of goods sold were P30,000,000 and P20,000,000 respectively.
All sales and purchases were made on credit.
Various expenses of P5,000,000 were paid in cash. There were no other pertinent transactions.

1. What is the total amount of collections from costumers?

a. 28,000,000
b. 32,000,000
c. 30,000,000
d. 29,000,000
Answer: A
Solution:

Sales on account 30,000,000

Increase in A/R 2,000,000

Collections from customers 28,000,000

2. What is the total amount of payment to suppliers?

a. 11,500,000
b. 21,500,000
c. 15,500,000
d. 20,000,000
answer: B
solution:

Purchase on account 18,500,000

Decrease in
inventory 1,500,000

Cost of goods sold 20,000,000

Purchase on account 18,500,000

Decrease in A/P 3,000,000

Payment to suppliers 21,500,000

3. What is the cash balance on December 31?

a. 13,000,000
b. 16,500,000
c. 10,500,000
d. 9,500,000
Answer: D
Solution:

Cash bal - Jan 1 8,000,000

Collections from costumers 28,000,000

Payment to suppliers (21,500,000)

Expenses paid (5,000,000)

Cash balance - Dec
31 9,500,000