Financial Statements and Cash Flow

Financial Statements Analysis

 PROBLEM 1 (STATEMENT OF FINANCIAL
POSITION)
David Corporation had the following balance sheet
accounts and balances:
Accounts Payable--------P60,000
Accounts Receivable-----10,000
Building---------------------?
Cash-------------------------30,000
Equipment-----------------70,000
King David, Capital-------?
Land-------------------------70,000
Required:
a. If the balance of King David, Capital account was
P210,000, what would be the balance of the Building
account?
b. If the balance of the Building account was P170,000,
what would be the total liabilities and owner’s
equity?
c. If the balance of the Building account was P150,000
and the equipment was sold for P70,000, what would
be the total of owner’s equity?
 PROBLEM 2 (STATEMENT OF STOCKHOLDERS’ EQUITY)

Angel Corporation has P450,000 of

retained earnings on December 31,
2018. The company paid common
dividends of P25,000 in 2019 and had
retained earnings of P400,000 on
December 31, 2019.
Required: How much is Angel
Corporation’s net income for the year
2019?
 PROBLEM 3 (INCOME STATEMENT)
The Lamb Inc. sold 1,300 finance textbooks
for P650 each. These books cost Lamb Inc.
P450 to produce. Lamb Inc. spent P20,000
(selling expense) to convince the customers
to buy its books. In addition, Lamb Inc.
borrowed P350,000 on January 1, 2015, on
which the company paid 10 percent interest.
The company’s tax rate is 20 percent.
Depreciation Expense for the year was
P6,000.
Required: Compute the earnings after tax.
 PROBLEM 4.1 (STATEMENT OF CASH FLOWS)
Paul Shop had cash flows from investing activities of
P2,567,000 and cash flows from financing activities
of P3,549,000. The balance in the firm’s cash account
was P950,000 at the beginning of 2019 and
P1,025,000 at the end of the year.

Required: Calculate Paul Shop’s cash flow from

operations for 2019.
 PROBLEM 4.2 (STATEMENT OF CASH FLOWS)
Identify whether each of the following items increases,
decreases, or has no effect on effect on operating
cash flow.
a. Increase in accounts receivable
b. Increase in notes payable
c. Depreciation expense
d. Increase in securities
e. Decrease in accounts payable
f. Decrease in prepaid expenses
g. Increase in inventory
h. Dividend payment
i. Increase in accrued expenses
 PROBLEM 5 (FREE CASH FLOW)
Titus Corporation reported free cash flows for 2019 of
P23 million and investment in operating capital of P13
million. The firm listed P8 million in depreciation
expense and P17 million in taxes on its 2019 income
statement.

Required: Calculate Titus Corporation’s 2019 EBIT.

 PROBLEM 6 (ECONOMIC VALUE ADDED)
The following year-end data pertain to Adam
Corporation:
Current assets---------------------------------------800,000
Non-current assets------------------------------3,200,000
Current liabilities-----------------------------------400,000
Non-current liabilities (8% interest rate)---1,000,000
During the year, the company earned income before
interest and taxes of P800,000. It pays income tax
at the rate of 25%. Its cost of equity capital is 12%.

Required: Compute for the Economic Value Added

(EVA).