PROBLEM SOLVING 1

The profit or loss section of the statement of comprehensive income of ITS NOT OK TO BE OK Company
for the year ended December 31, 2020 is reproduced below:

Sales P
Cost of goods sold 3,700,000
Gross profit P2,400,00
Gain on sale of equipment 0 100,000
Salaries expense -820,000
Insurance expense -380,000
Depreciation expense 220,000
Profit before interest and income tax P1,080,00
Interest expense 0 120,000
Profit before income tax P960,000
Income tax expense 288,000
Profit P672,000

The following information is also available:

Decrease in accounts receivable Increase P120,000
in inventory Decrease in accounts payable 280,000
Increase in salaries payable Increase in 160,000
prepaid insurance Decrease in interest 100,000
payable Increase in income tax payable 180,000
30,000
18,000

Required: Prepare ITS OK NOT TO BE OK Company's 2020 Statement of Cash Flows using the direct
method.
PROBLEM SOLVING 2

The profit or loss section of the statement of comprehensive income of ITS NOT OK TO BE OK Company
for the year ended December 31, 2020 is reproduced below:

Sales P
Cost of goods sold 3,700,000
Gross profit P2,400,00
Gain on sale of equipment 0 100,000
Salaries expense -820,000
Insurance expense -380,000
Depreciation expense 220,000
Profit before interest and income tax P1,080,00
Interest expense 0 120,000
Profit before income tax P960,000
Income tax expense 288,000
Profit P672,000

The following information is also available:

Decrease in accounts receivable Increase P120,000
in inventory Decrease in accounts payable 280,000
Increase in salaries payable Increase in 160,000
prepaid insurance Decrease in interest 100,000
payable Increase in income tax payable 180,000
30,000
18,000
Required: Prepare ITS OK NOT TO BE OK Company's 2020
Statement of Cash Flows using the indirect method.