Red Claude M.

Palacio
BSA1-A

Answer the following for your activity:

For PAS 7

Debbie Company provided the following data:

2011 2010
Cash 350,000 150,000
Accounts receivable, net 840,000 580,000
Merchandise inventory 660,000 420,000
Prepaid expenses 50,000 100,000
Long term investment 80,000 -
Property, plant and equipment 1,130,000 600,000
Accumulated depreciation 110,000 50,000
Accounts payable 530,000 440,000
Accrued expenses 140,000 130,000
Dividend payable 70,000 -
Note payable – long term debt 500,000 -
Share capital 1,200,000 900,000
Retained earnings 560,000 330,000
Net credit sales 6,400,000 4,000,000
Cost of goods sold 5,000,000 3,200,000
Expenses 1,000,000 520,000
Net income 400,000 280,000

All accounts receivable and accounts payable relate to trade merchandise. Accounts payable are recorded net and
always paid to take all of the discounts allowed. The allowance for doubtful accounts at the end of 2011 was the same as
at the end of 2010. No receivables were charged against the allowance during 2011.

The proceeds from the note payable were used to finance a new store building. Share capital was sold to provide
additional working capital.

Based on the provisions of PAS 7 solve for the following:

1. What is the net cash provided by operating activities?

Operating Activities
Net Income 120,000
Accounts receivable (260,000)
Merchandise inventory (240,000)
Prepaid expense 50,000
Depreciation expense 60,000
Accrued expense (10,000)
Accounts payable (90,000)
Net credit sales 2,400,000
Cost of goods sold (1,800,000)
Expense (480,000)
Net cash flow from operating (250,000)
activities

2. What is the net cash provided by financing activities?

Financing Activities
Notes payable-long term 500,000
Dividend payable (70,000)
Net cash flow from financing 430,000
activities

3. What is the net cash used in investing activities?

Investing Activities
Long term investment 80,000
Property, plant and equipment (530,000)
Share capital 300,000
Net cash flow from investing (150,000)
activities
For PAS 8 answer the following:

1. PAS 8 requires the consistent selection and application of accounting policies, what is the accounting treatment
for a change that is identified as a change in accounting policy?
- The accounting treatment for a change that is identified as a change in accounting policy could possibly be:
Transitional Provision in a PFRS, Retrospective application, and if retrospective is impracticable, it is a
prospective application in the other hand.
2. Distinguish a change in accounting policy, a change in accounting estimate and a correction of error by
description, accounting treatment and effect of adjustment.
- A change in accounting policy is resulted from a change in measurement basis like change from FIFO to the
Weighted Average cost formula for inventories.
- A change in accounting result from new information or new developments and, accordingly, are not
corrections of errors.
- Correction of prior period error is when the misapplication of principles, oversight or misinterpretations of
facts, and mathematical mistakes.
3. When it is difficult to distinguish a change in accounting policy from a change in accounting estimate, how will
the change be treated?
- A change shall be treated as a Change in an Accounting Estimate when it is difficult to distinguish a change in
accounting policy from a change in the accounting estimate.