Problem 1

Categorize each cash flow as (O) for operating, (I) for investing, or (F) for financing

a. Cash received from I

sale of a building
b. Cash paid for salaries O
c. Cash received for O
interest on a note
receivable
d. Cash paid to acquire I
a new truck
e. Cash loaned out to a F
customer in the form
of a long-term note
f. Cash received for O
services rendered
g. Cash paid for interest O
h. Cash paid for I
insurance on
equipment
i. Cash received from a O
debtor representing
payments of
principal
j. Cash paid out to I
acquire a building

Problem 2

Cash Flows from Operating Activities-Indirect Method

Imara Andam Business Solutions had a profit of P330,000 in 2019. During the year, the entity
had depreciation expense of P70,000. Accounts receivable increased by P110,000 and accounts
payable increased by P50,000. The entity started operations in 2019 and the foregoing are the
entity’s only current assets and current liabilities.
Required:
Determine the net cash flows from operating activities using the indirect method.

Net cash flow from

Operating Activities
Net income P 300,000
Depreciation Expense 70,000
Increase in Accounts (110,000)
receivable
Increase in Accounts Payable 50,000
Net of Cash provided by P 340,000
operating activities
Problem 3

Classifications of Events on Statement of Cash Flows

The following transactions pertain to the operations of Party Consultants, an events planning
entity owned by Eleanor Tan. The entity had the following transactions during the month:
1. Received a P180,000 cash investment from the owner.
2. Provided P400,000 services on account
3. Incurred P220,000 of operating expenses on account
4. Collected P320,000 cash from accounts receivable
5. Allowed a P30,000 cash withdrawal to the owner of the business
6. Paid P160,000 cash on accounts payable
7. Performed services for P30,000 cash
8. Paid P12,000 cash for expenses
Required:
1. Classify each of these transactions as a cash flow from operating activities (OA),
investing activities (IA), or financing activities (FA). Transactions that do not affect
the statement of cash flows should be identified as “n/a”

1. Received a P180,000 FA
cash investment from
the owner.
2. Provided P400,000 N/A
services on account
3. Incurred P220,000 of N/A
operating expenses
on account
4. Collected P320,000 OA
cash from accounts
receivable
5. Allowed a P30,000 FA
cash withdrawal to
the owner of the
business
6. Paid P160,000 cash OA
on accounts payable
7. Performed services OA
for P30,000 cash
8. Paid P12,000 cash for OA
expenses
 2. Prepare a statement of cash flows.

Cash flows from Operating Activities

Cash inflows by operating
Activities
Cash receipts from customer P 320,000
Cash receipts from service 30,000 350,000
Cash outflows in operating
Activities
Cash paid for expenses (12,000)
Cash Paid for accounts (160,000) (172,000)
payable
Net cash provided by 178,000
Operating Activities
Cash Flow provided by Financing Activities
Cash inflows provided by
Financing Activities
Cash Withdrawn 30,000
Investment by owner 180,000
Net of Cash provided by 210,000
Financing Activities
Total Net of Cash from 388,000
Activities

Problem 4

The following data are taken from the records of Howa Company for the year 2009.

Cash received

From customers P 500,000

Proceeds of Bank Loan 800,000
Additional Investment of Howa 125,000
Proceeds of sale of equipment 35,000
Dividends on stock investments 5,000
Interest Income 2,300
Commissions Income 10,000
Cash paid

Operating expenses 195,000

Principal of Bank Loan 200,000
Withdrawal of Howa 40,000
Interest on bank loan 4,000
Purchase of furniture 18,000
Taxes and licenses 5,600

Cash balance on January 1, 2009 is P555,000.

 Required: Prepare a statement of cash flows.

HOWA COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2009
Cash Flows from Operating
Activities
Cash inflows provided by
Operating Activities
From customers P 500,000
Dividends on stock 5,000
investments
Interest income 2,300
Commission income 10,000 P 517,300
Cash outflows used in
Operating Activities
Interest on Bank Loan (4,000)
Operating Expenses (195,000)
Taxes and licenses (5,600) (204,600)
Net cash provided by 312,700
Operating Activities
Cash Flows from Investing
Activities
Cash inflows provided by
Investing Activities
Proceeds of sale of 35,000
equipment
Cash outflows used in
Investing Activities
Purchase of furniture (18,000)
Net cash provided by 17,000
Investing Activities
Cash Flows from Financing
Activities
Cash inflows provided by
Financing Activities
Proceeds of Bank Loan 800,000
Additional Investment of 125,000 925,000
Howa
Cash outflows from
Financing Activities
Principal of Bank Loan (200,000)
Withdrawal of Howa (40,000) (240,000)
Net cash provided by 685,000
Financing Activities

Net Increase in Cash 1,014,700

Equivalents
Add: Cash and Cash 555,000
Equivalents, Beginning
Cash and Cash Equivalents, P 1,569,700
Ending
Problem 5

The following data are taken from the records of Kiwi Pot Company for the year 2010.

Collections from customers P 1,750,000

Provision for bad Debts 7,000
Additional Investment of Kiwi 250,000
Withdrawal of Kiwi 225,000
Dividends on stock investments received 15,000
Interest Income received 7,800
Taxes and licenses paid 6,000
Operating expenses paid 305,000
Commissions Income received 20,000
Principal of Bank Loan paid 500,000
Interest on bank loan paid 15,000
Proceeds from sale of Equipment 45,000
Cash purchase of building 1,000,000
Proceeds of Bank Loan 670,000
Depreciation Expense 25,000

Cash balance on January 1, 2009 is P99,000.

Required: Prepare a statement of cash flows.

Portions of the financial statements for Myriad Products are provided below.

KIWI POT COMPANY

Statement of Cash Flows
For the Year Ended December 31, 2010
Cash Flows from Operating
Activities
Cash inflows provided by
Operating Activities
From customers P 1,750,000
Dividends on stock 15,000
investments
Interest income 7,800
Commission income 20,000 P 1,792,800
Cash outflows used in
Operating Activities
Interest on Bank Loan (15,000)
Operating Expenses (305,000)
Taxes and licenses (6,000)
Depreciation Expense (25,000) (351,000)
Net cash provided by 1,441,800
Operating Activities
Cash Flows from Investing
Activities
Cash inflows provided by
Investing Activities
 Proceeds of sale of 45,000
equipment
Cash outflows used in
Investing Activities
Purchase of Building (1,000,000)
Net cash provided by (955,000)
Investing Activities
Cash Flows from Financing
Activities
Cash inflows provided by
Financing Activities
Proceeds of Bank Loan 670,000
Additional Investment of Kiwi 250,000 920,000
Cash outflows of Financing
Activities
Principal of Bank Loan (500,000)
Withdrawal of Kiwi (225,000) (725,000)
Net cash provided by 195,000
Financing Activities

Net Increase in Cash 681,800

Equivalents
Add: Cash and Cash 99,000
Equivalents, Beginning
Cash and Cash Equivalents, P 780,800
Ending

Problem 6

MYRIAD PRODUCTS COMPANY

Income Statement
For the Year Ended December 31, 2011
($ in millions)
Sales $660
Cost of goods sold (250)
Gross margin 410
Salaries expense $110
Depreciation expense 90
Patent amortization expense 5
Interest expense 20
Loss on sale of investments 3 (228)
Income before taxes and extraordinary 182
loss
Income tax expense (91)
Income before extraordinary loss 91
Extraordinary loss (earthquake) 10
Less: Tax savings (5) 5
Net Income $ 86

MYRIAD PRODUCTS COMPANY

Selected Accounts from Corporative Balance Sheets
December 31, 2011 and 2010
($ in millions)

Year
 2011 2010 Change
Cash $102 $100 $ 2
Accounts receivable 220 232 (12)
Inventory 440 450 (10)
Accounts payable 140 134 6
Salaries payable 80 86 (6)
Interest payable 25 20 5
Income taxes 15 10 5
payable

Required:
1. Prepare the cash flows from operating activities section of the statement of cash
flows for Myriad Products Company using the direct method.

MYRIAD PRODUCTS COMPANY

Statement of Cash Flows
For the Year Ended December 31, 2011
($ in millions)
Cash received from customer $ 672
Cash payment to merchandise (234)
Cash payment to salaries expense (116)
Cash paid for interest expense (15)
Cash paid for income tax (86)
Net cash flow from Operating Activities $221

2. Prepare the cash flows from operating activities section of the statement of cash
flows for Myriad Products Company using the indirect method.

MYRIAD PRODUCTS COMPANY

Statement of Cash Flows
For the Year Ended December 31, 2011
($ in millions)
Net Income $86
Depreciation expense 90
Loss on sale of investment 3
Amortization expense 5
Increase in cash balance (2)
Decrease in Accounts receivable 12
Decrease in inventory 10
Increase in accounts payable 6
Decrease in salaries expense (6)
Increase in interest 5
Increase in interest tax payable 5
Net cash flow from operating activities $214