STATEMENT OF THE CASH FLOW

Problem 1: Lax Company provided the following information during the current year.

Dividend received 500,000

Dividend paid 1,000,000
Cash received from customers 9,000,000
Proceeds from issuing share capital 1,500,000
Interest received 200,000
Proceeds from sale of long-term investment 2,000,000
Cash paid to supplier and employees 6,000,000
Interest paid on long term debt 400,000
Income taxes paid 300,000
Cash balance, January 1 1,800,000

Required:
1. What is the net cash provided by operating activities for the current year using the direct method?
2. What is the net cash provided by investing activities?
3. What is the net cash provided by financing activities?
PROBLEM # 1.
LAX COMPANY
DIRECT METHOD

OPERATING ACTIVITIES
INFLOW
Cash received from customers 9,000,000.
Dividend received 500,000.
Interest received 200,000. 9 700 000
OUTFLOW
Cash paid to supplier and employees 6,000,000.
Interest paid on long term debt 400,000.
Income taxes paid 300,000. (6 700 000)
Net cash provided by OPERATING ACTIVITY 3 000 000

INVESTING ACTIVITY
Proceeds from sale of long-term investment 2,000,000.
Net cash provided by INVESTING ACTIVITY 2 000 000

FINANCING ACTIVITY
INFLOW
Proceeds from issuing share capital 1,500,000.
OUTFLOW
Dividend paid (1,000,000)
Net cash provided by FINANCING ACTIVITY 500 000
Net cash provided by the activities 5 500 000.
Cash balance, January 1 1,800,000
Cash balance, December 3 7 300 000
Problem 2: Star Company provided the following data for the preparation of statement of cash flows for
the current year using the direct method:

Cash balance, beginning 1,500,000

Cash paid to purchase inventory 7,800,000
Cash received from sale of trading securities 2,500,000
Cash paid for interest 450,000
Cash paid to repay a loan 1,000,000
Cash collected from customers 10,000,000
Cash received from issuance of ordinary shares 1,200,000
Cash paid for dividend 2,000,000
Cash paid for income taxes 1,350,000
Cash paid to purchase trading securities 1,000,000

Required:
1. What is the net cash provided by operating activities?
2. What is the net cash used in financing activities?
3. What is the cash balance at year-end?
PROBLEM # 2.
STAR COMPANY
DIRECT METHOD

OPERATING ACTVITIES
INFLOW
Cash received from sale of trading securities 2,500,000.
Cash collected from customers 10,000,000. 12 500 000
OUTFLOW
Cash paid to purchase inventory 7,800,000.
Cash paid for interest 450,000.
Cash paid for income taxes 1,350,000.
Cash paid to purchase trading securities 1,000,000. (10 600 000)
Net Cash provided by OPERATING ACTIVITIES 1 900 000

FINANCING ACTIVITIES
OUTFLOW
Cash paid to repay a loan 1,000,000. (1 000 000)
INFLOW
Cash paid for dividend 2,000,000.
Cash received from issuance of ordinary shares 1,200,000. 3 200 000
Net cash used by FINANCING ACTIVITIES 1 800 000
Net cash provided for the period/ by activities 100 000.
Cash balance, beginning 1,500,000.
Cash Balance end. 1 600 000
Problem 3: Fragile Company used the direct method to prepare the statement of cash flows. The entity
had the following cash flows during the current year:

Cash receipts from issuance of ordinary shares 4,000,000

Cash receipts from customers 2,000,000
Cash receipts from dividends on long-term investments 300,000
Cash receipts from repayment of loan 2,200,000
Cash payments for wages and other operating expenses 1,200,000
Cash payments for insurance 100,000
Cash payment for taxes 400,000
Cash payments for dividends 200,000
Cash payments to purchase land 800,000
Cash balance – beginning 3,500,000

Required:
1. What is the net cash provided by operating activities for the current year using the direct method?
2. What is the net cash provided by investing activities?
3. What is the net cash provided by financing activities?
4. What is the cash balance at year-end?
PROBLEM # 3
FRAGILE COMPANY
DIRECT METHOD

OPERATING ACTIVITY
INFLOW
Cash receipts from customers 2,000,000
Cash receipts from dividends on long-term investments 300,000 2 300 000
OUTFLOW
Cash payments for wages and other operating expenses 1,200,000
Cash payments for insurance 100,000
Cash payment for taxes 400,000 (1 700 000)
Net Cash provided by OPERATING ACTIVITIES 600 000

INVESTING ACTIVITIES
OUTFLOW
Cash payments to purchase land (800,000)
INFLOW
Cash receipts from repayment of loan 2,200,000
Net cash provided by INVESTING ACTIVITY 1 400 000

FINANCING ACTIVITY
OUTFLOW
Cash payments for dividends (200,000)
INFLOW
Cash receipts from issuance of ordinary shares 4,000,000
Net cash provided by FINANCING ACTIVITY 3 800 000
Net cash provided 5 800 000.
Cash balance – beginning 3,500,000.
Cash balance, ending 9 300 000.
Problem 4: Stonewell Company provided the following comparative statement of financial position at
year-end:

2018 2017
Cash 1,550,000 400,000
Accounts receivable 1,400,000 950,000
Investment, at cost 200,000 350,000
Property, plant, and equipment 1,800,000 1,300,000
Accumulated depreciation (600,000) (450,000)
Accounts payable 950,000 750,000
Share capital 2,500,000 1,000,000
Retained earnings 900,000 800,000

Additional information:
 An investment was sold for P250,000 during the current year.
 There was no disposal of property, plant, and equipment during the current year.
 The net income for the current year was P600,000.
 A dividend of P500,000 was paid on December 31, 2018.

Required:
1. What is the net cash provided by operating activities for the current year?
2. What is the net cash provided by investing activities?
3. What is the net cash provided by financing activities?

PROBLEM # 4
 STONEWELL COMPANY
INDIRECT METHOD

A. Net income 600 000

Adjustment:
1. Depreciation 150 000
2. Sales Price 250 000
Cost of investment. (150 000)
Gain on sale (100 000)
Adjusted Net Income 650 000
B. OPERATING ACTIVITY
Increase in Account receivable 2017 950 000.
2018 (1 400 00) (450 000)

Increase in Accounts payable 2017 750 000.

2018 (950 000) 200 000
Net cash provided by OPERATING ACTIVITY 400 000

INVESTING ACTIVITY
Proceeds of sale of investment 250 000.
Purchase of property plant and Equipment (500 000)
Net cash provided by INVESTING ACTIVITY (250 000)

FINANCING ACTIVITY
Proceeds of Share Capital 2017 1 000 000
2018 (2 500 000) 1 500 000
Dividends paid (500 000)
Net cash provided by FINANCING ACTIVITY 1 000 000
Net cash provided by Activities 1 150 000.
Cash Beginning Balance 2017 400 000
Cash ending 2018 1 550 000.

Retained Earnings Accumulated Depreciation

Beg. 800 000 Beg. 450 000

Dividend payable 500 000 Net income 600 000 Sold 0 Dep. Exp. 150 000

End 900 000 End 600 000

Investment Property Plant & equipment

Beg. 350 000 Sale 150 000 Beg. 1 300 000 Sale 0
Additional 0 Additional 500 000

Problem 5: Mountain Company provided the following comparative financial positions:

End 200 000 End 1 800 000
 2018 2017
Cash and cash equivalents 5,600,000 7,400,000
Accounts receivable 3,000,000 3,500,000
Inventory 8,000,000 6,500,000
Prepaid expenses 400,000 600,000
Property, plant, and equipment 55,000,000 42,000,000
Accumulated depreciation (20,000,000) (16,000,000)
Accounts payable 6,000,000 9,500,000
Accrued expenses 1,500,000 500,000
Notes payable -current 2,000,000 5,000,000
Notes payable – non-current 10,000,000 -
Ordinary share capital 30,000,000 30,000,000
Retained earnings 3,500,000 (1,000,000)

Cash needed to purchase new equipment and to improve the working capital position was raised by
borrowing from bank with a long-term note.

Equipment costing P2,000,000 and carrying amount of P1,500,000 was sold for P2,500,000.

The entity paid cash dividend of P3,000,000 in in the current year. There were no entries in the retained
earnings account other than to record the dividend and net income for the year.

Required:
1. What is the net cash provided by operating activities for the current year?
2. What is the net cash provided by investing activities?
3. What is the net cash provided by financing activities?

PROBLEM # 5
MOUNTAIN COMPANY
INDIRECT METHOD

A. Net income 6 500 000

Adjustment:
1. Depreciation 4 500 000
2. Sales price 2 000 000
Carrying Amount (1 500 000)
Gain on sale (1 000 000)
Adjusted Net Income 10 000 000

B. OPERATING ACTIVITY
Decrease in Account receivable 2017 3 500 000.
2018 (3 000 00) 500 000

Increase in Inventory 2017 6 500 000

2018 (8 000 000) (1 500 000)

Decrease Prepaid Expense 2017 600 000

2018 (400 000) 200 000

Decrease in Accounts payable 2017 9 500 000

2018 (6 000 000) (3 500 000)

Increase in Accrued Expenses 2017 500 000

2018 (1 500 000) 1 000 000
Net cash provided by OPERATING ACTIVITY 6 700 000

INVESTING ACTIVITY
Purchase of Proper Plant and Equipment (15 000 000)
Proceeds of Sale 2 500 000
Net cash provided by INVESTING ACTIVITY (12 500 000)

FINANCING ACTIVITY
Proceeds from bank 10 000 000.
Notes Payable current 2017 5 000 000.
2018 (2 000 000) (3 000 000)
Dividends paid (3 000 000)
Net cash provided by FINANCING ACTIVITY 4 000 000
Net cash provided by Activities. (1 800 000)
Cash Beginning Balance 2017 7 400
000
Cash ending 2018 5 600 000.
 Retained Earnings Accumulated Depreciation

Beg. (1 000 000) Beg. 16 000 000

Dividend payable 3 000 000 Net income 6 500 000 Sale 500 000 Dep. Exp. 4 500 000

End 2 500 000 End 20 000 000

Property Plant & equipment

Beg. 42 000 000 Sale 2 000 000

Additional 15 000 000

End 55 000