NAGA COLLEGE FOUNDATION, INC.

M.T. Villanueva Avenue, Naga City

College of Business and Accountancy
Financial Management

Assignment No. 2
Cash Flow Analysis
1. (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
_______________
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 85,000
__________
Cash paid to merchandise suppliers P P 623,000 P 2,824,000
in 2010 ___________

2. (CASH FLOW – OPERATING ACTIVITIES USING THE INDIRECT METHOD) Burtis Company’s net
income last year was P77,000. Changes in the company’s balance sheet accounts for the year appear
below:
Debit balances Increase Credit balances Increase
(decrease) (decrease)
Cash P 12,000 Accumulated P 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:
a. Operating activities
b. Investing activities
c. Financing Activities

3. (CASH FLOWS FOR OPERATING ACTIVITIES USING THE DIRECT METHOD) Carney Company’s
comparative balance sheet and income statement for last year appear below:

Statement of Financial Position

Ending Beginning Ending Beginning

balance balance balance balance
Cash P 59,000 P 36,000 Accounts payable P 19,000 P 33,000
Accounts 45,000 27,000 Accrued liabilities 37,000 20,000
receivable
Inventory 29,000 41,000 Taxes payable 4,000 13,000
Prepaid expenses 5,000 11,000 Bonds payable 90,000 130,000
Long-term 280,000 230,000 Deferred taxes 23,000 17,000
investments
Plant and 535,000 520,000 Common stock 130,000 100,000
equipment
Accumulated (297,000) (271,000) Retained earnings 353,000 281,000
depreciation
Total assets P 656,000 P 594,000 Total liabilities P 656,000 P 594,000
and SHE
 Income statement

Sales P 900,000
Cost of goods sold (500,000) P 400,000
Operating expenses (260,000)
Net operating income P 140,000
Income taxes (42,000)
Net income P 98,000

The company declared and paid P 26,000 in cash dividends during the year.
Required: Prepare in good form the operating activities section of the company’s statement of cash
flows for the year using the direct method.