Statement of Cash Flows

1. “Cash flows” in the cash flow statement are

a. Inflows of cash and cash equivalents.
b. Outflows of cash and cash equivalents
c. Inflows and outflows of cash
d. Inflows and outflows of cash and cash equivalents

2. The statement of cash flows provides answers to all of the following questions except
a. Where did the cash come from during the period?
b. What was the cash used for during the period?
c. What was the change in the cash balance during the period?
d. What is the impact of inflation on the cash balance at the end of the year?

3. Operating activities are

a. The principal revenue-producing activities of the entity and other activities that are not investing or financing
activities.
b. The acquisition and disposal of long-term assets and other investments not included in cash
equivalents.
c. Activities that result in changes in the size and composition of the contributed equity and
borrowings of the entity.
d. Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge
and understanding.

4. Entities are encouraged to report cash flows from operating activities using
a. The direct method, whereby major classes of gross
cash receipts and gross cash payments are disclosed.
b. The indirect method, whereby profit or loss is
adjusted for the effects of transactions of a non- cash nature, any deferrals or accruals of past or
future operating cash receipts or payments, and items of income or expense associated with
investing or financing cash flows.
c. Either a or b.
d. Neither a nor b.

5. Interest paid may not be classified as cash outflow for

a. Operating activities
b. Investing activities
c. Financing activities
d. None of the above

6. Interest and dividend received may not be classified as cash inflows from
a. Operating activities
b. Investing activities
c. Financing activities
d. None of the above

7. Dividends paid to stockholders are reported on the cash flow statement as

a. Both financing and investing activity
b. Financing activity
c. Operating activity
d. Investing activity

8. Company uses the direct method to prepare its statement of cash flows. The company had the
following cash flows during the current year
Cash receipts from the issuance of
ordinary shares P400,000
Cash receipts from customers 200,000
Cash receipts from dividends on long-
term investments 30,000
Cash receipts from repayment of loan
made to another company 220,000
Cash payments for wages and other
operating expenses 120,000
Cash payments for insurance 10,000
Cash payments for dividends 20,000
Cash payments for taxes 40,000
Cash payment to purchase land 80,000
The net cash provided by (used in) operating activities is
a. P60,000 c. P30,000
b. P40,000 d. (P20,000)

9. In preparing a statement cash flows using the indirect method, cash flows from operating activities
a. Are always equal to accrual accounting income

b. Are calculated as the differences between revenues and expenses

c. Can be calculated by appropriately adding to or deducting from net income those items in the
Statement of Cash Flows
income statement that do affect cash
d. Can be calculated by appropriately adding to or deducting from net income those items in the
income statement that do not affect cash

10. Word Corporation is preparing its statement of cash flows and has provided this information:
Net income before taxes P400,000
Depreciation on property, plant and
equipment 200,000
Loss on sale of building 100,000
Interest expense 150,000
Interest payable, beginning of the year 100,000
Interest payable, end of the year 50,000
Income taxes paid 100,000
Accounts receivable, beginning of the
year 500,000
Accounts receivable, end of the year 850,000
Inventory, beginning of the year 500,000
Inventory, end of the year 400,000
Accounts payable, beginning of the year 200,000
Accounts payable, end of the year 500,000
The net cash provided by operating activities is
a. P750,000 c. P600,000 b. P700,000 d. P500,000

11. Using the indirect method, cash flows from operating activities would be increased by which of the following?
a. Gain on sale of investments
b. Increase in prepaid expenses
c. Decrease in accounts payable
d. Decrease in accounts receivable

12. Aklan Company reported net income of P10,000,000 for the current period. Changes occurred in several
balance sheet accounts during the period as follows:
Investment in shares, carried
at equity P2,500,000 increase
Premium on bonds payable 500,000 decrease
Accumulated depreciation,
caused by major repair 1,000,000 decrease
Deferred tax liability 400,000 increase
In the current period statement of cash flows, the cash provided by operating activities should be
a. P7,400,000 c. P6,400,000
b. P9,400,000 d. P7,000,000

13. Antique Corp. reported net income of P420,000 for the current period. Changes occurred in several statement of
financial position accounts as follows:
Equipment P35,000 increase
Accumulated depreciation 56,000 increase
Note payable 42,000 increase
Additional information:
• During the year, Antique sold equipment costing P35,000, with accumulated depreciation of P16,800,
for a gain of P7,000.
• In December of the current year, Antique
purchased equipment costing P70,000 with
P28,000 cash and a 12% note payable of P42,000.
• Depreciation expense for the year was P72,800.
In Antique's current period statement of cash flows, net cash used in investing activities should be
a. P 2,800 c. P16,800 b. P30,800 d. P49,000

14. Capiz Company had the following activities during the current period:
• Acquired investment in ordinary shares classified as FA@VTOCI for P3,000,000.
• Sold investment in trading securities for
P4,500,000 when the carrying amount was
P3,800,000.
• Acquired a P5,000,000 one-year certificate of deposit from a bank. During the year, interest of P400,000
was received from the bank.
• Collected dividends of P800,000 on investments in equity securities.
In the current period statement of cash flows, net cash used in investing activities should be
a. P8,000,000 c. P3,500,000 b. P6,800,000 d. P3,000,000

15. Cash inflows from investing result from

a. Decreases in liabilities.
b. Increases in liabilities.
c. Decreases in noncurrent assets.
d. Increases in noncurrent assets.

16. Warner Limited had the following cash flows during a reporting period:
• Acquisition of subsidiary, net of cash flows
P250,000
• Dividends paid P65,000
• Repayment of borrowings P90,000
Statement of Cash Flows
• Interest paid on borrowings P57,000
• Proceeds from sale of plant P215,000
What is the amount of the cash flows in relation to financing activities of Warner Limited for the reporting
period?
a. Net cash inflow P155,000
b. net cash inflow P212,000
c. Net cash outflow P155,000
d. net cash outflow P212,000

17. The transactions of Tsape Company for the current year included the following:
Cash borrowed from bank for purchase
of land P6,000,000
Purchase of land for cash 6,000,000
Sale of securities for cash 1,000,000
Dividend declared (of which P2,000,000
was paid during the year) 3,000,000
Issuance of ordinary shares for cash 7,000,000
Payment of bank loan including interest
of P500,000 3,500,000
Increase in customers’ deposits 500,000

The current year statement of cash flows should report net cash provided by financing activities at
a. P8,000,000 c. P8,500,000 b. P7,500,000 d. P7,000,000

Use the following information for the next five questions. The following is a list of the items to be included in the
preparation of the current year statement of cash flows for the Norhan Company:
a) Net income, P59,200
b) Payment for purchase of building, P98,000
c) Increase in accounts receivable, P7,400
d) Proceeds from issuance of ordinary shares, P37,100
e) Increase in accounts payable, P4,500
f) Proceeds from sale of land, P7,000
g) Depreciation expense, P12,600
h) Payment of dividends, P36,000
i) Gain on sale of land, P5,300
j) Decrease in inventory, P3,700
k) Payment for purchase of long-term investments, P9,600
l) Amortization of discount on bonds payable, P1,900
m) Proceeds from issuance of note, P18,000
n) Increase in deferred taxes payable, P5,000
o) Equipment acquired by finance lease, P19,500
p) Decrease in salaries payable, P2,300
q) Beginning cash balance, P20,300

Compute for the following.

18. Cash provided by operating activities

a. P68,100 c. P74,900 b. P89,900 d. P71,900

19. Cash used in investing activities

a. P120,100 c. P100,600 b. P107,600 d. P 9,600

20. Cash provided by financing activities

a. P19,100 c. P20,600 b. P38,600 d. P 1,100

21. Net decrease in cash

a. P19,600 c. P13,400 b. P 6,600 d. P 9,600

22. Cash balance, ending

a. P13,700 c. P 700 b. P10,700 d. P6,900

23. The first step in the preparation of the statement of cash flows requires the use of information included in which
comparative financial statements?
a. Statements of cash flows
b. Statements of financial position
c. Income statements
d. Statements of retained earnings

Use the following information for the next three questions. The statement of financial position data of Davao Company
at the end of 2020 and 2019 follow:
Statement of Cash Flows

Land was acquired for P250,000 in exchange for ordinary shares, par P250,000, during the year; all equipment
purchased was for cash. Equipment costing P25,000 was sold for P10,000; book value of the equipment was
P20,000 and the loss was reported as an ordinary item in net income. Cash dividends of P50,000 were charged to
retained earnings and paid during the year; the transfer of net income to retained earnings was the only other entry
in the Retained Earnings account.

Compute for the following.

24. Net cash provided by operating activities.

a. P120,000 c. P140,000 b. P130,000 d. P165,000

25. Net cash provided by (used in) investing activities. a. P10,000 c. (P90,000) b.
(P100,000) d. (P340,000)

26. Net cash provided by (used in) financing activities. a. P150,000 c. (P100,000) b.
P350,000 d. (P250,000)

27. PAS 7 requires that investing and financing transactions that do not require the use of cash or
cash equivalents should be
a. Excluded from a cash flow statement
b. Included in a cash flow statement before operating, investing and financing activities
c. Presented in the cash flow statement after
operating activities and before investing and financing activities
d. Presented in a cash flow statement after the operating, investing and financing activities have
been presented

28. Which of the following items would be presented in a cash flow statement?
a. Payment of dividends through a share investment scheme
b. Acquisition of an investment in a subsidiary for consideration consisting of an exchange of non-
current assets and liabilities
c. Refinancing of long-term debt
d. Proceeds from the issue of debentures

*** The only thing that stands between a man and what he wants
from life is often merely the will to try it and the faith to believe that it is
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