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Problem No. 1 – Cash flows from Operating Activities: Direct and Indirect Method
HAITI Company
INCOME STATEMENT
For the year Ended December 31, 2022
Sales P20,700,000
Cost of goods sold:
Inventory, Jan. 1 P5,700,000
Purchases 13,200,000
Goods Available for sale 18,900,000
Inventory, December 31 4,800,000 14,100,000
Gross Income 6,600,000
Operating Expenses
Selling expenses P1,350,000
Administrative Expenses 2,100,000 3,450,000
Net Income P3,150,000
Additional Information:
Questions:
1. What is the total amount of cash received from customers during the year?
2. What is the total amount of cash paid to suppliers during the year?
3. What is the total amount of cash paid for operating expenses during the year?
4. What is the net income of cash provided by operating activities?
Revenue P2,520,000
Operating expenses (excluding depreciation) P1,872,000
Depreciation expense 180,000
Loss on sale of equipment 78,000 P2,130,000
Income before income taxes 390,000
Income tax expense 120,000
Net Income P270,000
Ghana Company’s comparative statement of financial position at December 31, 2022 and 2021,
contained the following data:
Intermediate Accounting 3 – Statement of Cash Flows
2022 2021
Accounts receivable P111,000 P162,000
Accounts payable* 123,000 93,000
Income taxes payable 12,000 25,500
*Pertain to operating expenses
Questions:
BURUNDI COMPANY’s income statement for the year ended December 31, 2022, reported net income
of P478,800. In preparing the statement of cash flows, the accountant noted the following
transactions during 2022 that might affect cash flow from operating activities:
a. Burundi purchased 300 treasury shares at a cost of P20 per share. These shares were then
resold at P25 per share.
b. Burundi sold 300 of Loleng ordinary shares at P200 per share. The fair value of these shares
was P145 per share at December 31, 2021. The investments was shown as a non-trading
equity security on Burundi’s statement of financial position at December 31, 2021.
c. Burundi changed from the straight-line method to the double-declining balance method of
depreciation for its machinery. The cumulative effect of the change was P43,800.
d. Burundi revised its estimate for bad debts, Prior to 2022, Burundi’s bad debt expense was 1%
of its net sales. In 2022, this rate was increased to 2%. Net sales for 2022 were P1,500,000,
and net accounts receivable decreased by P36,000 during 2022.
e. Burundi issued 1,500 shares of its P10 par ordinary shares for a patent. The ordinary shares
had a market value of P23 per share on the transaction dat.
f. Depreciation expense amounted to P117,000.
g. Burundi Company holds 40% of the Sioning Corp’s ordinary shares as a long-term investment.
Sioning Corp. reported net income of P81,000 for 2022.
h. Sioning Corp. paid a total cash dividend of P6,000 to all investees in 2022.
i. Burundi declared a 10% stock dividend. Three thousand of P10 par ordinary shares were
distributed. The market price on the date of declaration of stock dividend was P20 per share.
Problem No. 4 – Cash Flows from Operating, Investing and Financing Activities
The worksheet below presents the comparative statement of financial positions items of NAMIBIA
COMPANY at December 31, 2022 and 2021, with a column that shows the increase (decrease) from
2021 to 2022:
(Decrease)
Cash P4,037,500 P3,500,000 P537,500
Intermediate Accounting 3 – Statement of Cash Flows
Additional Information:
a. ON December 31, 2021, Namibia acquired 25% of Orly Co.’s ordinary shares for P1,375,000.
On that date, the book value of Orly’s assets and liabilities, which approximated their fair
values, was P5,500,000. Orly reported income of P600,000 for the year ended December 31,
2022. No dividend was paid on Orly’s
O rly’s ordinary shares during the year.
b. During 2022, Namibia loaned P1,500,000 to Ariel Co., an unrelated company. Ariel made the
first semi-annual principal repayment of P187,500, plus interest at 10% on December 31,
2022.
c. On January 2, 2022, Namibia sold equipment costing P300,000, with a carrying amount of
P175,000, for P200,000 Cash.
d. On December 31, 2022, Namibia entered into a finance lease for an office building. The
present value of the annual rental payments is P2,000,000, which equals the fair value of the
building. Namibia made the first rental payment of P300,000 when due on January 2, 2023.
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