University of Cebu- Banilad Campus

COLLEGE OF BUSINESS AND ACCOUNTANCY

Gov., Cuenco Avenue, Banilad,Cebu City
STATEMENT OF CASH FLOWS ANSWER KEY

Name: ______________________________________Course & Year: _________ Schedule: ___________________ Date: ________

ASSIGNMENT 01

(TEST I) Multiple Choice: Shade your answers with YELLOW:

1. The statement of cash flows reports all of the following except

a. the net change in cash for the period. c. the free cash flows generated during the period.
b. the cash effects of operations during the period. d. investing transactions.
64 C
2. The statement of cash flows helps meet one of the objectives of financial reporting, which is to assess all of the following
except the
a. amount of future cash flows. c. timing of future cash flows.
b. source of future cash flows. d. uncertainty of future cash flows.
65 B
3. If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows?
a. It would depend on whether you are using the direct or the indirect method.
b. It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section.
c. It would be a negative $8,000 in the financing section and a positive $8,000 in the investing section.
d. It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.
66 D
4. Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
a. Cash purchases of equipment. c. Cash received as repayment for funds loaned.
b. Cash purchases of bonds issued by another company. d. Cash purchase of treasury stock.
67D
5. Making and collecting loans and disposing of property, plant, and equipment are
a. operating activities. c. financing activities.
b. investing activities. d. liquidity activities.
68 B
6. Which of the following would be classified as a financing activity on a statement of cash flows?
a. Declaration and distribution of a stock dividend c. Sale of a loan receivable
b. Deposit to a bond sinking fund d. Payment of interest to a creditor
34 B
7. The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect
method for operating activities) as a(n)
a. addition to net income. c. investing activity.
b. deduction from net income. d. financing activity.
35 B
8. Crabbe Company reported P80,000 of selling and administrative expenses on its income statement for the past year. The
company had depreciation expense and an increase in prepaid expenses associated with the selling and administrative
expenses for the year. Assuming use of the direct method, how would these items be handled in converting the accrual based
selling and administrative expenses to the cash basis?
Increase in Increase in
Depreciation Prepaid Expenses Depreciation Prepaid Expenses
a. Deducted From Deducted From c. Deducted From Added To
b. Added To Added To d. Added To Deducted From
36 C
9. When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will
result in an adjustment to reported net earnings because
a. cash was increased while cost of goods sold was decreased.
b. cost of goods sold on an accrual basis is lower than on a cash basis.
c. acquisition of inventory is an investment activity.
d. inventory purchased during the period was less than inventory sold resulting in a net cash increase.
37 B
10. When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the
following adjustments in determining cash flow from operating activities?
Direct Method Indirect Method
a. Increase Decrease
b. Decrease Increase
c. Increase Increase
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 University of Cebu- Banilad Campus
COLLEGE OF BUSINESS AND ACCOUNTANCY
Gov., Cuenco Avenue, Banilad,Cebu City
d. Decrease Decrease

38 C

ASSIGNMENT 02

(TEST II) Problem Solving:

A. Joshtine Company’s balance sheet accounts as of December 31, 2017 and 2016 and information relating to 2017
activities are presented below.
2017 2016
Assets
Cash 460,000 200,000
Trading securities 600,000 -
Accounts receivable (net) 1,020,000 1,020,000
Inventory 1,360,000 1,200,000
Long-term investments 400,000 600,000
Property, plant and equipment 3,400,000 2,000,000
Accumulated depreciation (900,000) (900,000)
Patent 180,000 200,000
Total assets 6,520,000 4,320,000
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities 1,650,000 1,440,000
Short-term debt 650,000 -
Ordinary share, P20 par 1,600,000 1,400,000
Share premium 740,000 500,000
Retained earnings 1,880,000 980,000
Total liabilities and stockholders’ equity 6,520,000 4,320,000
 Net income for 2017 was P1,380,000.
 Cash dividends of P480,000 were declared and paid in 2017.
 Equipment costing P800,000 and having a carrying amount of P300,000 was sold in 2017 for P300,000.
 A long-term investment was sold in 2017 for P270,000. There were no other transactions affecting long-term
investments in 2017.
 10,000 shares of common stock were issued in 2017 for P44 a share.
 The trading securities were purchased for cash on December 31, 2017.

Required: Prepare a statement of cash flows under the indirect method. (Use the space below after the problems)
1,280,000/1,630,000/610,000
B. The net income for the year ended December 31 for Kaila Corporation was P3,520,000. Additional data are as
follows:
Purchase of plant assets 2,800,000
Depreciation of plant assets 1,480,000
Dividends declared 970,000
Net decrease in noncash current assets 290,000
Loss on sale of equipment 130,000
What should be the cash provided by operating activities in Kaila’s cash flow statement for the year ended December 31
using the indirect method? ____________________
5,420,000
C. Renz Company reported net income of P7,500,000 for 2017. Changes occurred in several balance sheet accounts
during 2017 as follows:
Investment in Videogold stock carried on the equity basis 550,000 increase
Accumulated depreciation, caused by major repair to project equipment 210,000 decrease
Premium on bonds payable 140,000 decrease
Deferred tax liability 180,000 increase
In Renz’s 2017 cash flow statement, the reported net cash provided by operating activities should be?
________________
6,990,000

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 University of Cebu- Banilad Campus
COLLEGE OF BUSINESS AND ACCOUNTANCY
Gov., Cuenco Avenue, Banilad,Cebu City
D. The 2017 net income Renz Company was P3,000,000. Following are the changes in Renz’s balance sheet accounts
during 2017:
Deferred tax liability 30,000 decrease
Accumulated depreciation, due to major repair to equipment 40,000 decrease
Long term investment at equity 110,000 increase
Unearned interest income 20,000 decrease
The reported net cash provided by operating activities in 2017 Renz’s cash flow statement should be?
_____________
2,840,000

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