STATEMENT OF CASH FLOWS

PROBLEM 1
Samantha Corporation reported the following comparative statement
of financial position:

Assets 2019 2018

Cash and cash equivalents 120,000 150,000 Direct method: Operatig Activities
Accounts receivable 370,000 210,000 Accounts receivable Prepaid insurance
Inventory 1,090,000 860,000 2018 210,000 20,000 writeoff 2018 90,000
Prepaid insurance 80,000 90,000 sales 4,450,000 4,270,000 collections payment 90,000 100,000
Property, plant and equipment 4,300,000 3,620,000
Accumulated depreciation - 840,000 - 720,000
5,120,000 4,210,000 2019 370,000 2019 80,000

Liabilities and equity Accounts payable Salaries payable

Accounts payable 400,000 345,000 345,000 2018 40,000
Salaries payable 70,000 40,000 payment 2,575,000 2,630,000 purchases payment 610,000 640,000
Income tax payable 35,000 15,000
Accrued interest payable 5,000 - 400,000 2019 70,000
Bonds payable 600,000 -
Share capital 3,050,000 3,050,000
Retained earnings 1,100,000 760,000 Income tax payable Acc interest payable
Treasury shares - 140,000 - 15,000 2018 -
5,120,000 4,210,000 payment 180,000 200,000 income tax expen payment 35,000 40,000

35,000 2019 5,000

The income statement for the year ended December 31, 2019 showed the following:
Rent expense 350,000 all paid in cash
Sales 4,450,000 on account
Cost of goods sold Direct method: Investing Activities
Inventory - January 1 860,000
Purchases 2,630,000 on account PPE Accu. Depreciation
Goods available for sale 3,490,000 2018 3,620,000 - 720,000
Inventory - December 31 - 1,090,000 2,400,000 purchase 870,000 190,000 sale sale 140,000 260,000
Gross income 2,050,000
Gain on sale of equipment 60,000 2019 4,300,000 - 840,000
Total income 2,110,000
Expenses:
Salaries 640,000 Cash 110,000 Equipment 870,000
 Insurance 100,000 Accu. dep 140,000 Cash 870,000
Rent 350,000 Equipment 190,000
Depreciation 260,000 Gain 60,000
Bad debt writeoff 20,000
Interest expense 40,000 1,410,000 Direct method: Financing Activities
Income before tax 700,000
Income tax 200,000 Dividend paid - 160,000
Net income 500,000 Bonds 600,000
Treasury shares - 140,000
Additional information:

● Cash dividends of P160,000 were declared and paid during the year.
● Equipment costing P190,000 and with accumulated depreciation of P140,000 was
sold for P110,000 cash.
● New equipment was purchased for cash.
● Bonds payable were issued for cash at the face value of P600,000.
● The treasury shares were purchased at cost of P140,000.

Required: Prepare statement of cash flows using direct method

and indirect method.
 Put the amount ONLY, on the space given.

Samantha Corporation Samantha Corporation

Statement of Cash Flows Statement of Cash Flows
For the years ended December 31, 2019 For the years ended December 31, 2019
DIRECT METHOD Amount INDIRECT METHOD
Cash flows from operating activities Cash flows from operating activities Amount
Collections from customers 4,270,000 Net income before tax 500,000
Insurance paid - 90,000 Adjustments for:
insurance Payment for merchandise - 2,575,000 Depreciation 260,000
Salaries paid - 610,000 Gain on sale of equipment - 60,000
Rent paid - 350,000 Operating income before working capital changes
Cash generated from operations - Decrease (increase) in:
Interest paid - 35,000 Increase in Accounts receivable - 160,000
Income tax paid - 180,000 Increase in Inventories - 230,000
2018 Net cash provided by operating activities 430,000 Decrease in Prepaid insurance 10,000
salaries expense Increase in:
Cash flows from investing activities Accounts payable 55,000
2019 Proceeds from sale of equipment 110,000 Salaries payable 30,000
Purchase of equipment - 870,000 Accrued interest payable 5,000
Net cash used in investing activities - 760,000 Cash generated from operations
Income tax paid 20,000
2018 Cash flows from financing activities Net cash provided by operating activities 430,000
interest exp. Payment of dividend - 160,000
Issuance of bonds 600,000 Cash flows from investing activities
2019 Purchase of treasury shares - 140,000 Proceeds from sale of equipment 110,000
Net cash provided by financing activities 300,000 Purchase of equipment - 870,000
Net cash used in investing activities - 760,000
Decrease in cash and cash equivalents 30,000
Cash and cash equivalents - January 1, 2019 150,000 Cash flows from financing activities
Cash and cash equivalents - December 31, 2019 120,000 Payment of dividend - 160,000
Issuance of bonds 600,000
2018 Purchase of treasury shares - 140,000
depreciation Net cash provided by financing activities 300,000

2019 Increase in cash and cash equivalents - 30,000

Cash and cash equivalents - January 1, 2019 150,000
Cash and cash equivalents - December 31, 2019 120,000