La Consolacion College-Manila

REINVENTING EDUCATION FOR THE FUTURE

SCHOOL OF BUSINESS AND ACCOUNTANCY

FINANCIAL MANAGEMENT 2

M2 CASH FLOW AND FINANCIAL PLANNING

M2 QUIZ (CF AND FINPLN)

I. Multiple Choice (THEORIES AND PROBLEMS)

Instruction: Identify the letter that best completes the statement or answers the
question. Write the letter of your choice in box of your answer sheet.
ERASURES NOT ALLOWED.

1. Pickering Company's prepaid insurance was $8,000 as of December 31, 2021, and $10,000 as of
December 31, 2022. Pickering reported insurance expense of $15,000 on the 2022 statement of profit
or loss. What amount would be reported in the statement of cash flows as insurance paid using the
direct method? 
 
A.  $13,000
B.  $17,000
C.  $15,000
D.  $23,000
 
2. Dooling Corporation reported balances in the following accounts for the current year:
 
  Beginning Ending
Inventories $600 $300
Accounts payable 300 500

Cost of goods sold was $7,500. What was the amount of cash paid to suppliers? 
A.  $7,000
B.  $7,200
C.  $7,300
D.  $7,500

 
3. Sneed Corporation reported balances in the following accounts for the current year:
 
  Beginning Ending 
Income tax payable $50   $30 
Deferred tax liability 80  140 

Income tax expense was $230 for the year. What was the amount paid for taxes? 
A.  $280
B.  $220
C.  $210
D.  $190

4. In determining cash flows from operating activities (indirect method), adjustments to net profit or
loss should not include ______. 
 
A.  an addition for depreciation expense
B.  an addition for bond discount amortization
C.  an addition for a gain on sale of equipment
D.  an addition for patent amortization

 
5. S Company reported net profit for 2022 in the amount of $400,000. The company's financial
statements also included the following:
 
Increase in accounts receivable $80,000
Decrease in inventory 60,000
Increase in accounts payable 200,000
Depreciation expense 104,000
Gain on sale of land 148,000

What is net cash provided by operating activities under the indirect method? 
 
A.  $432,000
B.  $536,000
C.  $580,000

D.  $832,000

 
6. Which of the following is reported as a deduction from net profit when using the indirect method
to determine net cash flows from operating activities? 
 
A.  depreciation expense
B.  amortization of a patent
C.  amortization of premium on bonds payable
D.  dividends declared

 
7. Creble Company reported net profit for 2022 in the amount of $40,000. The company's financial
statements also included the following:
 
Increase in accounts receivable $4,000
Decrease in inventory 2,000
Depreciation expense 3,000
Gain on sale of equipment 5,000

In the statement of cash flows what is net cash provided by operating activities under the indirect
method? 
 
A.  $36,000
B.  $41,000
C.  $40,000
D.  $38,000

8. When using the indirect method to determine cash flows from operating activities, adjustments to
net profit or loss should not include ______. 
 
A.  an addition for amortization expense
B.  an addition for bond discount amortization
C.  an addition for a gain
D.  an addition for a loss

 
9. The net profit for Howie Doohan Corporation was $280 million for the year ended December 31,
2022. Related information follows:

Sale of ordinary shares for cash, $34 million.

Amortization of trademark, $2 million.
Cash dividends paid, $28 million.
Decrease in salaries payable, $2 million.
Depreciation expense, $40 million.
Increase in accounts payable, $18 million.
Increase in bonds payable, $26 million.

Assume that the company classifies dividends paid as a financing activity. Net cash flows from
operating activities during 2022 should be reported as ______. 
 
A.  $302 million
B.  $338 million
C.  $342 million
D.  $364 million

 
10. Selected information from Peridot Corporation's accounting records and financial statements for
2022 is as follows ($ in millions):
 
Cash paid to acquire machinery $36
Reacquired Peridot ordinary shares 50
Proceeds from sale of land 90
Gain from the sale of land52
Investment revenue received 66
Cash paid to acquire office equipment 80

Assume that Peridot classifies investment revenue received as an operating activity. In its statement of
cash flows, Peridot should report net cash outflows from investing activities of ______. 
 
A.  $26 million
B.  $46 million
C.  $72 million
D.  $78 million

11. The following information is taken from the production budget for the first quarter:
Beginning inventory in units 1,200
Sales budgeted for the quarter 426,000
Capacity in units of production facility 472,000

How many finished goods units should be produced during the quarter if the company desires
3,200 units available to start the next quarter?
a. 428,000
b. 424,000
c. 474,000
d. 429,200

12. The production budget shows expected unit sales of 32,000. Beginning finished goods units
are 3,600. Required production units are 33,600. What are the desired ending finished goods
units?
a. 2,000
b. 3,600
c. 6,400
d. 5,200

13. The production budget shows expected unit sales are 100,000. The required production units are
104,000. What are the beginning and desired ending finished goods units, respectively?
Beginning Units Ending Units
a. 10,000 6,000
b. 6,000 10,000
c. 4,000 10,000
d. 10,000 4,000

14. The direct materials budget shows:

Desired ending direct materials 48,000 pounds
Total materials required 69,000 pounds
Direct materials purchases 63,200 pounds
The total direct materials needed for production is
a. 21,000 pounds.
b. 5,800 pounds.
c. 15,200 pounds.
d. 132,200 pounds.

15. Dart, Inc. makes and sells umbrellas. The company is in the process of preparing its Selling
and Administrative Expense Budget for the last half of the year. The following budget data are
available:
Variable Cost Per Unit Sold Monthly Fixed Cost
Sales commissions $0.60 $ 6,000
Shipping 1.20
Advertising 0.30
Executive salaries 40,000
Depreciation on office equipment 8,000
Other 0.35 28,000
 Expenses are paid in the month incurred. If the company has budgeted to sell 8,000 umbrellas
in October, how much is the total budgeted variable selling and administrative expenses for
October?
a. $16,800
b. $18,400
c. $101,600
d. $19,600

16. Strand Company is planning to sell 400 buckets and produce 380 buckets during March. Each
bucket requires 500 grams of plastic and one-half hour of direct labor. Plastic costs $10 per
500 grams and employees of the company are paid $15.00 per hour. Manufacturing overhead
is applied at a rate of 110% of direct labor costs. Strand has 300 kilos of plastic in beginning
inventory and wants to have 200 kilos in ending inventory. How much is the total amount of
budgeted direct labor for March?
a. $3,000
b. $6,000
c. $2,850
d. $5,7000

17. Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes
during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor.
Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour.
Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900
pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory.

What is the total amount to be budgeted for manufacturing overhead for the month?
a. $2,871 b. $2,970
c. $11,484 d. $11,880

Questions 18 through 20 are based on the following information. Super Drive, a computer disk
storage and backup company, uses accrual accounting. The company’s statement of Financial
Position for the year ended November 30, 2018 is as follows:

Super Drive
Statement of Financial Position
November 30, 2018

Assets
Cash P 52,000
Accounts receivable, net 150,000
Inventory 315,000
Property, plant and equipment 1,000,000
Total assets P1,517,000

Liabilities and Shareholder’s Equity

Accounts payable P 175,000
Common stock 900,000
Retained earnings 442,000
Total liabilities and
Shareholder’s equity P1,517,000

Additional information regarding Super Drive’s operations includes the following:

 Sales are budgeted at P520,000 for December 2008 and P500,000 for January 2009.
 Collections are expected to be 60% in the month following the sale.
 80% of the disk components are purchased in the month prior to the month of sale, and 20%
are purchased in the month of sale. Purchased components are 40% of the cost of goods sold.
 Payment for the components is made in the month following the purchase.
 Cost of good sold is 80% of sales.

18. The budgeted cash collections for the month of December 2008 are
 a. P208,000 b. P520,000 c. P402,000 d. P462,000 (cma)

19. The projected balance in accounts payable on December 31, 2008 is

a. P161,280 b. P166,400 c. P416,000 d. P201,600 (cma)

20. Refer to the original data, the projected gross profit for the month ending December 31, 2008 is
a. P416,000 c. P104,000
b. P536,000 d. 0 (cma)

La Consolacion College-Manila
REINVENTING EDUCATION FOR THE FUTURE
SCHOOL OF BUSINESS AND ACCOUNTANCY

FINANCIAL MANAGEMENT 2

QUIZ

ANSWER SHEET

DATE ______________________

SCORE/RATE

NAME

__________________________ ______________________
LAST FIRST M.I.

1 11
2 12
3 13
4 14
5 15
6 16
7 17
8 18
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10 20