NAME: MAE LOU FRIA B.

ABARIENTOS
SECTION: AC24

EXERCISES ON CASH FLOW STATEMENT ANALYSIS

THEORIES:

1) Identify the following as financing or investing by putting an “X” mark on the appropriate
column:

INVESTING FINANCING
A) Repayment of debt principal X
B) Gain on sale of land X
C) Payment of cash dividends X
D) Purchase of common stock of another firm X
E) Purchase of land X
F) Issuance of common stock X
G) Increase in short-term debt X
H) Resale of treasury stock X
I) Sale of building X
J) Reduction of long-term debt X
K) Purchase of treasury stock X
L) Purchase of equipment X

2) The following are based on the direct method of presenting cash flow from operating
activities. Indicate whether the following items would be added or subtracted to/from the
relevant revenue or expense item in the calculation of cash flow from operating activities by
putting an “X” on the appropriate column:

ADD DEDUCT
a) Decrease in accounts receivable to calculate cash collections X
from sale
b) Decrease in inventories to calculate cash paid to supplier X
c) Increase in accounts payable to calculate cash paid to supplier X
d) Decrease in accrued salaries payable to calculate cash paid to X
employees
e) Depreciation expense for the period to calculate cash paid for X
operating expenses
f) Increase in prepaid expenses to calculate cash paid for X
operating expenses
g) Decrease in accrued interest payable to calculate cash paid for X
interest expense
h) Increase in deferred tax liability to calculate cash paid for tax X
expense

3) Below are certain events that took place at GLIZZARD inc. last year. Indicate how each of
them would be classified on a statement of cash flows by placing an “X” in the appropriate
activity and also an “X” in the source or use column as appropriate.

Operatin Investin Financin Sourc Use

g g g e
1) Short-term investment securities were X X
purchased
2) Equipment was purchased
3) Accounts payable increase
4) Deferred taxes decrease
5) Long-term bonds were issued
6) Common stock was sold
7) Interest was paid to long-term creditors
8) Long-term mortgage was entirely paid off
9) Cash dividends was declared and paid
10) Inventories decreased
11) Accounts receivable increased
12) Depreciation charges totalled P200,000
for the year
X X
X X
X X
X X
X X
X X
X X
X X
X X
X X
X X

PROBLEMS

1. (CASH RECEIPTS FROM CUSTOMERS) Fill in the blanks in the following schedule:
CASE A CASE B CASE C CASE D
Sales for 2010 P 800,000 $ 1,000,000 P 870,000 P 650,000
Accounts receivable:
 Beginning of 2010 42,000 37,000 28,000 31,000
 Ending of 2010 25,000 45,000 45,000 P 56,000
Cash collected from P 817,000 P 992,000 P 853,000 P 625,000
customers

2. (CASH PAYMENTS TO MERCHANDISE SUPPLIERS) Fill in the blanks in the following

schedule
CASE A CASE B CASE C
Cost of goods sold in 2010 P 649,000 P 621,000 P 2,833,000
Merchandise inventory:
 Beginning of 2010 P 91,000 P 57,000 P 262,000
 End of 2010 84,000 71,000 245,000
Accounts payable:
 Beginning of 2010 P 42,000 P 68,000 P 93,000
 Ending of 2010 51,000 P 80,000 85,000
Cash paid to merchandise suppliers in P 633,000 P 623,000 P 2,824,000
2010

3. (CASH FLOW – OPERATING ACTIVITIES USING THE INDIRECT METHOD)

Burtis Company’s net income last year was $77,000. Changes in the company’s balance
sheet accounts for the year appear below:
Debit balances Increase Credit balances Increase
(decrease) (decrease)
Cash $ 12,000 Accumulated $ 32,000
depreciation
Accounts receivable (16,000) Accounts payable 26,000
Inventory 18,000 Accrued liabilities (4,000)
Prepaid expenses 7,000 Taxes payable (7,000)
Long-term 20,000 Bonds payable (20,000)
investments
Plant and equipment 70,000 Deferred taxes 14,000
Common stock 30,000
Retained earnings 40,000
The company declared and paid cash dividends of $ 37,000 last year.
 Required: Construct in good form the following sections of the company’s statement of cash
flows for the year:
 operating activities section using the indirect method
Solution:

Operating Activities:
Net Income $77,000
Adjustments:
Depreciation Charges $ 32,000
Decrease in accounts receivable 16,000
Increase in inventory (18,000)
Increase in prepaid expense (7,000)
Increase in accounts payable 26,000
Decrease in accrued liabilities (4,000)
Decrease in taxes payable (7,000)
Increase in deferred taxes 14,000 52,000
Net cash provided by operating activities $129,000

4. (CASH FLOW – OPERATING ACTIVITIES USING THE INDIRECT METHOD)

Buntis Company’s net income last year was P 98,000. Changes in the company’s balance
sheet accounts for the year appear below:
Debit balances Increase Credit balances Increase
(decrease) (decrease)
Cash P 24,000 Accumulated P 32,000
depreciation
Accounts receivable 15,000 Accounts payable (14,000)
Inventory (18,000) Accrued liabilities 11,000
Prepaid expenses (6,000) Taxes payable (8,000)
Long-term 10,000 Bonds payable (40,000)
investments
Plant and equipment 40,000 Deferred taxes 12,000
Common stock 10,000
Retained earnings 62,000
The company declared and paid cash dividends of P 36,000 last year.
Required: Construct in good form the following sections of the company’s statement of cash
flow for the year:
 Operating activities section using the indirect method

Solution:

Operating Activities:
Net Income P 98,000
Adjustments:
Depreciation Charges $ 32,000
Increase in accounts receivable (15,000)
Decrease in inventory 18,000
Decrease in prepaid expense 6,000
Decrease in accounts payable (14,000)
Increase in accrued liabilities 11,000
Decrease in taxes payable (8,000)
Increase in deferred taxes 12,000 42,000
Net cash provided by operating activities P 140,000