Tabunggao, Shane Josa Marie M.

AC23

EXERCISES ON CASH FLOW STATEMENT ANALYSIS

THEORIES:
1) Identify the following as financing or investing by putting an “X” mark on the appropriate column:
INVESTING FINANCING
A) Repayment of debt principal X
B) Gain on sale of land X
C) Payment of cash dividends X
D) Purchase of common stock of another firm X
E) Purchase of land X
F) Issuance of common stock X
G) Increase in short-term debt X
H) Resale of treasury stock X
I) Sale of building X
J) Reduction of long-term debt X
K) Purchase of treasury stock X
L) Purchase of equipment X

2) The following are based on the direct method of presenting cashflow from operating activities. Indicate whether the following
items would be added or subtracted to/from the relevant revenue or expense item in the calculation of cash flow from operating
activities by putting an “X” on the appropriate column:
ADD DEDUCT
a) Decrease in accounts receivable to calculate cash collections from sale X
b) Decrease in inventories to calculate cash paid to supplier X
c) Increase in accounts payable to calculate cash paid to supplier X
d) Decrease in accrued salaries payable to calculate cash paid to employees X
e) Depreciation expense for the period to calculate cash paid for operating X
expenses
f) Increase in prepaid expenses to calculate cash paid for operating expenses X
g) Decrease in accrued interest payable to calculate cash paid for interest expense X
h) Increase in deferred tax liability to calculate cash paid for tax expense X

3) Below are certain events that took place at GLIZZARD inc. last year. Indicate how each of them would be classified on a
statement of cash flows by placing an “X” in the appropriate activity and also an “X” in the source or use column as appropriate.
Operating Investing Financing Source Use
1) Short-term investment securities were purchased X X
2) Equipment was purchased X X
3) Accounts payable increase X X
4) Deferred taxes decrease X X
5) Long-term bonds were issued X X
6) Common stock was sold X X
7) Interest was paid to long-term creditors X X
8) Long-term mortgage was entirely paid off X X
9) Cash dividends was declared and paid X X
10) Inventories decreased X X
11) Accounts receivable increased X X
12) Depreciation charges totalled P200,000 for the year X X

PROBLEMS

1. (CASH RECEIPTS FROM CUSTOMERS) Fill in the blanks in the following schedule:
CASE A CASE B CASE C CASE D
Sales for 2010 P 800,000 $ 1,000,000 P ____870,000 P 650,000
Accounts receivable:
 Beginning of 2010 42,000 37,000 28,000 31,000
 Ending of 2010 25,000 45,000 45,000 P _____56,000
Cash collected from customers P ____817,000 P P 853,000 P 625,000
_____992,000

2. (CASH PAYMENTS TO MERCHANDISE SUPPLIERS) Fill in the blanks in the following schedule
CASE A CASE B CASE C
Cost of goods sold in 2010 P 649,000 P 621,000 P 2,833,000
Merchandise inventory:
 Beginning of 2010 P 91,000 P 57,000 P 262,000
 End of 2010 84,000 71,000 245,000
 Accounts payable:
 Beginning of 2010 P 42,000 P 68,000 P 93,000
 Ending of 2010 51,000 P 80,000 85,000
Cash paid to merchandise suppliers in 2010 P _____633,000 P 623,000 P 2,824,000

3. (CASH FLOW – OPERATING ACTIVITIES USING THE INDIRECT METHOD) Burtis Company’s net income last year
was $77,000. Changes in the company’s balance sheet accounts for the year appear below:
Debit balances Increase (decrease) Credit balances Increase (decrease)
Cash $ 12,000 Accumulated depreciation $ 32,000
Accounts receivable (16,000) Accounts payable 26,000
Inventory 18,000 Accrued liabilities (4,000)
Prepaid expenses 7,000 Taxes payable (7,000)
Long-term investments 20,000 Bonds payable (20,000)
Plant and equipment 70,000 Deferred taxes 14,000
Common stock 30,000
Retained earnings 40,000
The company declared and paid cash dividends of $ 37,000 last year.
Required: Construct in good form the following sections of the company’s statement of cash flows for the year:
 operating activities section using the indirect  investing activities section
method  financing activities section

Burtis Company
Statement of Cash Flow
For the Year Ended December 31, 2020

Cash flow from operating activities:

Net income $ 77,000
Decrease in accounts receivable 16,000
Increase in inventory (18,000)
Increase in prepaid expenses (7,000)
Increase in deferred taxes 14,000
Increase in accounts payable 26,000
Decrease in accrued liabilities (4,000)
Decrease in taxes payable (7,000)
Accumulated depreciation 32,000
Net cash provided by operating activities $ 129,000

4. (CASH FLOW – OPERATING ACTIVITIES USING THE INDIRECT METHOD) Buntis Company’s net income last year
was P 98,000. Changes in the company’s balance sheet accounts for the year appear below:
Debit balances Increase (decrease) Credit balances Increase (decrease)
Cash P 24,000 Accumulated depreciation P 32,000
Accounts receivable 15,000 Accounts payable (14,000)
Inventory (18,000) Accrued liabilities 11,000
Prepaid expenses (6,000) Taxes payable (8,000)
Long-term investments 10,000 Bonds payable (40,000)
Plant and equipment 40,000 Deferred taxes 12,000
Common stock 10,000
Retained earnings 62,000
The company declared and paid cash dividends of P 36,000 last year.
Required: Construct in good form the following sections of the company’s statement of cash flow for the year:
 Operating activities section using the  Investing activities section
indirect method  Financing section

Buntis Company
Statement of Cash Flow
For the Year Ended December 31, 2020

Cash flow from operating activities:

Net income ₱ 98,000
Increase in accounts receivable (15,000)
Decrease in inventory 18,000
Decrease in prepaid expenses 6,000
Depreciation 32,000
Decrease in accounts payable (14,000)
Increase in accrued liabilities 11,000
Decrease in taxes payable (8,000)
Increase in deferred taxes 12,000
Net cash provided by operating activities ₱ 140,000