I.

Indicate whether each of the following would be added to or deducted from net income in
determining net cash flow from operating activities by the indirect method:
1. Increase in notes payable due in 90 days to vendors
2. Decrease in prepaid expenses
3. Increase in merchandise inventory
4. Loss on disposal of fixed assets
5. Decrease in accounts receivable
6. Decrease in salaries payable
7. Gain on retirement of long-term debt
8. Increase in notes receivable due in 90 days from customers
9. Depreciation of fixed assets
10. Amortization of patent
11. Decrease in accounts payable
II. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the
indirect method.

The net income reported on the income statement for the current year was P240,000. Depreciation
recorded on the equipment and a building amounted P72,000 for the year. Balances of the current asset
and current liability accounts at the beginning and end of the year are as follows:

End of Year Beginning of Year

Cash P67,200 P72,000
Accounts Receivable (net) 84,000 88,800
Inventories 168,000 150,000
Prepaid Expenses 9,600 10,800
Accounts Payable (merchandise creditors) 72,000 78,000
Salaries payable 12,000 10,200
III. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the
indirect method.
The income statement disclosed the following items for 2014:
Depreciation P 72,000
Gain on disposal of Equipment 42,000
Net Income 635,000
Balances of the current assets and current liability accounts changed between December 31, 2013,
and December 31, 2014, as follows: Increase and decreases in accounts
Accounts receivable P 11,200
Inventory (6,400)
Prepaid Insurance (2,400)
Accounts payable (7,600)
Income taxes payable 2,400
Dividends payable 1,700
()=Decrease