Indian Institute of Management Raipur

ePGP (Batch 1) 2021

Financial Accounting
Practice Problem set
Cash flow Statement
Prof M Kannadhasan Term 2

Prepare the cash flow statement from Computer Services Company’s income and balance sheets and
interpret the results.

Computer Services Company

Income Statement for the year ended December 31, 2021
Sales 5,07,000

Cost of goods sold 1,50,000

Operating expenses (excluding depreciation) 1,11,000

Depreciation expenses 9,000

Loss on disposal of plant assets 3,000

Interest expense 42,000 3,15,000

Income before income tax 1,92,000

Income tax expense -47,000

Net Income 1,45,000

Computer Services Company

Balance Sheets as of December 2021 & 2020
Assets 2021 2020

Current Assets

Cash 55,000 33,000

Accounts receivable 20,000 30,000

Inventory 15,000 10,000

Prepaid Expenses 5,000 1,000

Property, plant, and equipment

Land 1,30,000 20,000

Buildings 1,60,000 40,000

Accumulated depreciation - buildings (11,000) (5,000)

 Equipment 27,000 10,000

Accumulated depreciation - equipment (3,000) (1,000)

Total assets 3,98,000 1,38,000

Liabilities and stockholders’ equity

Current liabilities

Accounts payable 28,000 12,000

Income taxes payable 6,000 8,000

Long-term liabilities

Bonds payable 1,30,000 20,000

Stockholders’ equity

Common stock 70,000 50,000

Retained Earnings 1,64,000 48,000

Total liabilities and stockholders’ equity 3,98,000 1,38,000

Additional information for 2021:

1. Depreciation expense was comprised of ₹6000 for building and ₹3000 for equipment.
2. The company sold equipment with a book value of ₹7000 (cost ₹8000, less accumulated depreciation
of ₹1000) for ₹4000 cash.
3. Issued ₹110,000 of long-term bonds in direct exchange of land.
4. A building costing ₹120,000 was purchased for cash. Equipment costing ₹25,000 was also purchased
for cash.
5. Issued common stock for ₹20,000 cash
6. The company declared and paid a ₹29,000 cash dividend.