QUIZ 2 - MIDTERM (CASH FLOW STATEMENT)

A. Indirect Method

Kaya Pa Ba Company has cash amounting to P470,000 at the start of 2017. During the
year, the firm purchased equipment amounting to P200,000 and borrowed P1,000,000 to
finance their upcoming plant expansion. This year’s operations resulted into a net income
of P700,000, reporting P50,000 as depreciated expense.

Moreover, the following differences were noticed in the Statement of Financial Position:

Increase in accounts receivable P20,000

Decrease in inventory 30,000
Increase in other current assets 40,000
Decrease in accounts payable 50,000
Increase in accrued expenses 60,000

In the Statement of Cash Flows for the year ended December 31, 2017, how much are the
following?

1. Net cash flow from operating activities

2. Net cash flow from investing activities
3. Net cash flow from financing activities
4. Cash balance at December 31, 2017

B. ANSWER THE FOLLOWING ( SHOW COMPUTATION)

1. The following information is available from the current period financial statements:
Net Income P175,000
Depreciation Expense 28,000
Increase in Accounts Receivable 16,000
Decrease in Accounts Payable 21, 000

Compute the net cash flow from operating activities using the indirect method (3 pts)

2. The following information is available from the current period financial statements

Net Income P165,000

Depreciation Expense 28,000
Increase in Accounts Receivable 16,000
Decrease in Accounts Payable 21,000

Compute the net cash flow from operating activities using the indirect method ( 3 pts)

3. Durrand Corporation’s accumulated depreciation increased by P12,000, while patents

decreased by P2,200 between consecutive balance sheet dates. There were no purchases or sales of
depreciable or intangible assets during the year. In addition, the income statement showed a gain of
P4,300 from sale of land.

Reconcile a net income of P65,000 to net cash flow from operating activities. (4 pts)
4. Fortune Corporation’s comparative balance sheet for current assets and liabilities are as follows:
(6 pts)

Dec. 31, 2020 Dec. 31, 2019 Change

Increase
(Decrease)
Accounts Receivable P7,500 P5,200
Inventory 11,500 16,000
Accounts Payable 4,300 5,200
Dividends Payable 4,000 3,000

Adjust 2020 net income of P65,000 for changes in operating assets and liabilities to arrive at cash flows
from operating activities using the indirect method

5. Kennedy, Inc. reported the following data:

Net Income P118,000
Depreciation Expense 15,000
Loss on disposal of equipment 10,000
Gain on sale of building 20,000
Increase in Accounts Receivable 7,000
Decrease in accounts payable (2,000)

Prepare the cash flows for operating activities under the indirect method as it would appear on the
statement of cash flows (4 pts)