What Is Culture - 7 Aspects of Culture

Landicho, Charlene M.
BSA-321
41
Cash Flow – Investing and Financing
Problem 41-1
Alpha company had the following activities during the current year.
 Acquired 2000 shares of Maybel Company for P2, 600, 000.

 Sold an investment in Rate Motors for P3, 500, 000 when the carrying value was
P3, 300, 000.
 Acquired a P5, 000, 000, 4-year certificate of deposit from a bank.
 During the year, interest of P375, 000 was paid to Alpha.
 Collected dividends of P120, 000 on share investments.
In the statement of cash flows, what amount should be reported as net cash used in
investing activities?
a. 3,725,000
b. 3,805,000
c. 3,980,000
d. 4,100,000
Solution 41-1 Answer d
Purchase of investment (2,600,000)
Sale of investment 3,500,000
Acquisition of 4-year certificate of deposit (5,000,000)
Net cash used in investing activities (4,100,000)
Problem 41-2
Jackson Company provided the following information at year end:
2015 2014
Cash 150,000 100,000
Equity investment at fair value through OCI 40,000 0
Accounts receivable 420,000 290,000
Inventory 330,000 210,000
Noncurrent assets 565,000 300,000
Accumulated depreciation 5000 25,000
All accounts receivable relate to trade merchandise. Cash discounts are not allowed to
customers but a service charge is added to an account for late payment. The allowance
for doubtful accounts at the end of 2015 was the same at the end of 2014. No
receivables were charged against allowance during 2015.
Under investing activities, what amount should be reported as cash outflows during
2015?
a. 265,000
b. 265,000
c. 305,000
d. 40,000
Solution 41-2 Answer c
Increase in equity investment at FVTOCI 40,000
Increase in noncurrent assets (565,000 -300,000) 265,000
Total cash outflows- investing 305,000
The charges in accounts receivable and inventory should be included in determining

cash flows from operating activities.
Problem 41-3
Riverside Company provided the following information for the current year:
 Purchased a building for P1,200,000. Paid P400,000 and signed a mortgage with
the seller for the remaining P800,000.
 Executed a debt-equity swap and replaced a P600,000 loan by giving the lender
ordinary shares worth P600,000 on the date the swap was executed.
 Purchased land for P1,000,000. Paid P350,000 and issued ordinary shares worth
P650,000.
 Borrowed P550,000 under a long-term loan agreement. Used the cash from the
proceeds as follows: P150,000 for purchase of additional inventory, P300,000 to
pay cash dividend, and P100,000 to increase the cash balance.
What amount should be reported as net cash used in investing activities in the
statement of cash flows?
a. 1,200,000
b. 2,200,000
c. 400,000
d 750,000
Cash paid for purchase of building (400,000)
Cash paid for purchase of land (350,000)
Net cash used – investing (750,000)
The debt-equity swap is disclosed as a financing activity. The borrowing of P550,000 is

a cash flow from financing.
The purchase of inventory of P300,000 is operating and the dividend payment of

P100,000 is financing.
Problem 41-4
Karr Company reported net income of P3,000,000 for the current year. Changes
occurred in certain accounts as follows:
Equipment 250,000 increase
Accumulated depreciation 400,000 increase
Note payable 300,000 increase

 During the year, the entity sold equipment costing P250,000, with accumulated
depreciation of P120,000 for a gain of P50,000.
 In December of the current year, the entity purchased equipment costing
P500,000 with P200,000 cash and a 12% note payable of P300,000
1. In the statement of cash flows, what amount should be reported as net cash used in
investing activities?
a. 20,000
b. 120,000
c. 220,000
d. 350,000
2. In the statement of cash flows, what amount should be reported as net cash provided
by operating activities?
a. 3,400,000
b. 3,470,000
c. 3,520,000
d. 3,570,000
Solution 41-4
Question 1 Answer a
Sale of equipment (carrying amount of 130,000 plus gain of 50,000) 180,000
Payment of equipment (200,000)
Net cash used in investing activities (20,000)
Question 2 Answer b
Net Income 3,000,000
Gain on sale of equipment ( 50,000)
Depreciation (400,000 + 120,000) 520,000
Net cash provided by operating activities 3,470,000

Problem 41-5
Zoe Company reported of net income of P3,400,000 for the current year. The net
income included depreciation of P840,000 and a gain on sale of equipment of
P170,000. The equipment had an original cost of P4,000,000 and accumulated
depreciation of P2,400,000. All of the following accounts increased during the current
year.
Patent 450,000
Prepaid rent 680,000
Financial asset at fair value through other comprehensive income 100,000
Bonds payable 500,000
What amount should be reported as net cash flow from investing activities?
a. 1,720,000 provided
b. 1,220,000 provided
c. 540,000 provided
d. 380,000 used
Solution 41-5 Answer b
Proceeds from sale of equipment 1,770,000
Increase in patent ( 450,000)
Increase in financial asset at FVTOCI ( 100,000)
Net cash provided by investing activities 1,220,000
Original cost 4,000,000
Accumulated depreciation 2,400,000
Carrying amount 1,600,000
Gain on sale of equipment 170,000
Problem 41-6
Zahn Company’s comparative statement of financial position on December 31, 2015
and 2014 reported accumulated depreciation balances of P800,000 and P600,000
respectively.
Property with a cost of P50,000 and carrying amount of P40,000 was the only property
sold in 2015.
What is the depreciation for 2015?
a. 190,000
b. 200,000
c. 210,000
d. 220,000
Solution 41-6 Answer c
Accumulated depreciation – December 31, 2014 600,000
Depreciation for 2015 (Squeeze) 210,000
Total 810,000
AD on property sold (50,000 – 40,000) 10,000
Accumulated depreciation – December 31, 2015 800,000
Problem 41-7
Matthew Company provided the following information:
Purchased of inventory 1,950,000
Purchased of land, with vendor financing of P1,000,000 for 2 years 3,500,000
Purchase of plant for cash 2,500,000
Sale of plant:
Carrying amount 500,000
Cash proceeds 400,000
Buyback of ordinary shares 700,000

What amount should be reported as investing net cash outflows?
a. 5,600,000
b. 4,600,000
c. 6,550,000
d. 5,300,000
Purchase of land (3,500,000)
Vendor financing 1,000,000
Cash payment (2,500,000)
Purchase of plant for cash (2,500,000)
Cash proceeds from sale of plant 400,000
Net cash outflows – investing 4,600,000
Problem 41-8
Erwin Company provided the following information:
January 1 December 31
Machinery 3,600,000 3,750,000
Accumulated depreciation 1,350,000 1,500,000
Loss disposal of old machinery 50,000
An old machinery with a cost of P700,000 and accumulated depreciation of P450,000

was traded in during the current year for a new machinery.
What amount was paid for the new machinery as a result of the trade in?
a. 850,000
b. 600,000
c. 550,000
d. 650,000
Machinery – January 1 3,600,000
New machinery acquired (SQUEEZE) 850,000
Total 4,450,000
Cost of old machinery ( 700,000)
Machinery – December 31 3,750,000
Cost of old machinery sold 700,000
Accumulated depreciation ( 450,000)
Carrying amount 250,000
Loss on disposal old machinery ( 50,000)
Trade in value of old machinery 200,000
List price of new machinery 850,000
Trade in value of old machinery ( 200,000)
Cash paid for new machinery 650,000
Problem 41-9
Roe Company provided the following account balances:
12/31/2014 12/31/2015
Machinery 2,500,000 3,200,000
Accumulated depreciation 1,020,000 1,200,000
Loss on sale of machinery 40,000
During 2015 the entity sold for P260,000 a machine that cost P400,000 and purchased
several items of machinery.
1. what is the depreciation of machinery for 2015?
a. 180,000
b. 240,000
c. 280,000
d. 320,000
2. what is the amount of machinery purchased in 2015?
a. 340,000
b. 700,000
c. 960,000
d. 1,100,000
Solution 41-9
Question 1 Answer c
Accumulated depreciation 1,020,000
Depreciation for 2015 280,000
Total 1,300,000
Accumulated depreciation on machine sold:
Cost 400,000
Carrying amount (260,000 + 40,000 loss) 300,000 ( 100,000)
Accumulated depreciation – December 31, 2015 1,200,000
Question 2 Answer d
Machinery – December 31, 2014 2,500,000
Machinery purchased in 2015 (SQUEEZE) 1,100,000
Total 3,600,000
Cost of machine sold ( 400,000)
Machinery – December 31, 2015 3,200,000

Problem 41-10
During the current year, Teb Company had the following activities related to financial
operations:
Payment for the early retirement of long term bonds payable
(carrying amount P7,400,000) 7,500,000
Distribution in the current year cash dividend declared
in prior year to preference shareholders 620,000
Carrying amount of convertible preference shares
converted into ordinary shares 1,200,000
Proceeds from sale of treasury shares
(carrying amount at cost, P860,000) 950,000
In the statement of cash flows for the current year, what amount should be reported as
net cash used in financing activities?
a. 7,170,000
b. 7,160,000
c. 5,970,000
d. 5,350,000
Solution 41-10 Answer a
Payment of bonds payable (7,500,000)
Payment of cash dividend ( 620,000)
Proceeds from sale of treasury shares 950,000
Net cash used in financing activities (7,170,000)
The conversion of preference shares into ordinary shares is a noncash financing activity
and therefore has no cash effect.
As a simple guide, cash effects of transactions involving nontrade liabilities and
shareholder’s equity are financing activities.
Problem 41-11
Faye Company provided the following account balances:
Proceeds from sale of equipment 100,000
Purchase of bond investment (face value P2M) 1,800,000
Amortization of bond discount 20,000
Dividend declared 450,000
Dividend paid 380,000
Proceeds from sale of treasury shares (cost, P650,000) 750,000
1. What is the net cash provided by financing activities?
a. 200,000
b. 270,000
c. 300,000
d. 370,000
2. What is the net cash used in investing activities?
a. 1,700,000
b. 1,760,000
c. 1,880,000
d. 1,940,000
Solution 41-11
Question 1 Answer d
Dividend paid (380,000)

Proceeds from sale of treasury shares 750,000
Net cash provided for financing activities 370,000
Question 2 Answer a
Proceeds from sale of equipment 100,000
Purchase of bond investment (1,800,000)
Problem 41-12
Kollar Company provided the following data for the current year:
Purchaase of real estate for cash
(cash was borrowed from bank)
Sale of investment securities for cash
Dividend paid
Insurance of ordinary shares for cash
Purchase of patent for cash
Payment of bank loan
Increase in customers’ deposit
Issuance of bonds payable for cash
a. 5,000,000
b. 3,500,000
c. 4,500,000
d. 5,500,000
2. What is the net cash used in investing activities

a. 6,750,000
b. 3,750,000
c. 1,750,000
d. 500,000
Solution 41-12
Q1 Answer b Q2 Answer c
Cash borrowed from bank 5,500,000
Dividend paid (6,000,000)
Issuance of ordinary shares 2,500,000
Payment of bank loan (1,500,000)
Issuance of bonds payable 3,000,000
Net cash provided – financing 3,500,000
Purchase of real estate (5,500,000)
Sale of investment securities 5,000,000
Purchase of patent for cash (1,250,000)
Problem 41-13
Nelie Company provide the following information extracted from the accounting records
at the end of each year:
2015 2014
Borrowings 2,500,000 800,000
Share Capital 3,500,000 2,000,000
Retained Earnings 950,000 750,000
Borrowings of P300,000 were repaid during 2015 and new borrowings include P200,000
vendor financing arising on the acquisition of a property.
The movement in retained earnings comprises profit for 2015 of P900,000 net of
dividend paid of P700,000.
The movement in share capital arose from issuance of share capital for cash during the
year.
There was no dividend payable reported at the beginning and end of the current year.
What amount should reported as financing net cash inflows in the statement of cash
flows?
a. 2,400,000
b. 2,200,000
c.2,500,000
d.2,300,000
Solution 41-13
Net increase in borrowings 1,700,000
Vendor financing of property ( 200,000)
Net cash inflows from borrowings 1,500,000
Issuance of share capital 1,500,000
Dividends paid ( 700,000)
Net cash inflows from financing activities 2,300,000
Problem 41-14
Outlandish Company provided the following information for 2015:
Bonds Payable, January 1 5,000,000
Bonds Payable, December 31 20,000,000
During 2015, a P4,500,000 payment was made to retire the bonds payable with a face
amount of P5,000,000. Bonds payable with a face amount of P2,000,000 had been
issued in exchange for equipment.
In the statement of cash flow for the current year, what should be reported as proceeds
from issuance of bonds payable?
a. 15,000,000
b. 17,500,000
c. 18,000,000
d. 22,000,000
Solutions 41-14 answer c
Bonds payable, Jan 1 5,000,000
Total issuance of bonds payable (SQUEEZE) 20,000,000
Total 25,000,000
Face amount of bonds payable retired (5,000,000)
Bonds payable – December 31 20,000,000
Total issuance of bonds payable 20,000,000
Issuance of bonds payable for equipment (2,000,000)
Cash proceeds from issuance of bonds payable 18,000,000
Problem 41-15
Sarah Company reported bonds payable of P4,700,000 on December 31, 2014 and
P5,000,000 on December 31, 2015. During 2015, the entity issued P2,000,000 of bonds
payable in exchange for equipment. There was no amortization of premium or discount
during the year.
What is the payment for redemption of bonds payable?
a. 300,000
b.1,700,000
c. 2,000,000
d. 2,300,000
Bonds payable – December 31, 2014 4,700,000

Bonds payable issued in 2015 2,000,000
Bonds payable – December 31, 2015 (5,000,000)
Cash paid for bond redemption in 2015 1,700,000
Problem 41-16
Ocean Company provided the following information:
2015 2014
Retained earnings 3,000,000 2,500,000
Dividends payable 1,200,000 1,800,000
Net income 2,000,000
What amount was paid for dividends during the current year?
a. 2,100,000
b. 1,500,000
c. 1,900,000
d. 2,600,000
Solution 41-16 Answer a
Retained earnings – 2014 2,500,000
Net income for 2015 2,000,000
Total 4,500,000
Retained earnings – 2015 (3,000,000)
Dividends declared in 2015 1,500,000
Dividends payable – 2014 1,800,000
Dividends payable – 2015 (1,200,000)
Cash paid for dividends in 2015 2,100,000

42
Cash Flow - Comprehensive
Problem 42-1
Lax Company provided the following information during the current year.
Dividend received 500,000
Dividend paid 1,000,000
Cash received from customers 9,000,000
Proceeds from issuing share capital 1,500,000
Interest received 200,000
Proceeds from sale of long term investments 2,000,000
Cash paid to suppliers and employees 6,000,000
Interest paid on long term debt 400,000
Income taxes paid 300,000
Cash balance, January 1 1,800,000
1. What is the net cash provided by operating activities or the current year using direct
method?
a. 3,000,000
b. 3,300,000
c. 2,700,000
d. 2,000,000
2. What is the net cash provided by investing activities?
a. 2,500,000
b. 2,000,000
c. 2,200,000
d. 0
a. 1,500,000
b. 1,000,000
c. 500,000
d. 0
Solution 42-1
Q1 Answer a
Cash receipts:
Cash received from customers 9,000,000
Dividend received 500,000
Interest received 200,000 9,700,000
Cash payments:
Cash paid to suppliers and employees 6,000,000
Interest paid 400,000
Income taxes paid 300,000 6,700,000
Q2 Answer b
Proceeds from sale of long term investments 2,000,000
Note that alternatively the dividend received and interest received may be classified as
investing cash flow.
Q3 Answer c
Dividend paid (1,000,000)
Proceeds from issuing share capital 1,500,000
Net cash provided - financing 500,000
Note that alternatively the dividend paid may be classified as operating cash flow.
Problem 42-2
Star Company provided the following data for the preparation of the statement of cash
flows for the current year using the direct method.
Cash balance, beginning 1,500,000
Cash paid to purchase inventory 7,800,000
Cash received from sale of trading securities 2,500,000
Cash paid for interest 450,000
Cash paid to repay a loan 1,000,000
Cash collected from customers 10,000,000
Cash received from issuance of ordinary shares 1,200,000
Cash paid for dividend 2,000,000
Cash paid for income taxes 1,350,000
Cash paid to purchase trading securities 1000,000
1. What is the net cash provided by operating activities?
a. 1,900,000
b. 2,900,000
c. 2,350,000
d. 400,000
2. What is the net cash used in financing activities?
a. 3,000,000
b. 2,000,000
c. 1,800,000
d. 4,200,000
3. Whst is the cash balance at year end?

a. 3,400,000
b. 1,600,000
c. 1,400,000
d. 2,400,000
Solution 42-2
Q1 Answer a
Cash collected from customer 10,000,000
Cash received from sale of trading securities 2,500,000
Cash paid to purchase trading securities (1,000,000)
Cash paid to purchase inventories (7,800,000)
Interest paid (450,000)
Income taxes paid (1,350,000)
Cash flow from operating activities 1,900,000
Problem 42-3
Fragile Company used the direct method to prepare the statement of cash flows the
entity had the following cash flows during the current year:
Cash receipts from issuance of ordinary shares 4,000,000
Cash receipts from customers 2,000,000
Cash receipts from dividends on long term investments 300,000
Cash receipts from repayment of loan made to another entity 2,200,000
Cash payments for wages and other operating expenses 1,200,000
Cash payments for insurance 100,000
Cash payments for dividends 200,000
Cash payments for taxes 400,000

Cash payments to purchase land 800,000
Cash balance beginning 3,500,000
a. 600,000
b. 400,000
c. 300,000
d. 200,000
a. 2,200,000
b. 1,400,000
c. 3,000,000
d. 800,000
a. 4,000,000
b. 6,000,000
c. 3,800,000
d. 6,200,000
4. What is the net cash balance at year end?
a. 3,500,000
b. 9,300,000
c. 5,500,000
d. 5,800,000
Solution 42-3
Q1 Answer a
Cash receipts from customers 2,000,000

Cash receipts from dividends on long term investments 300,000
Cash payments for wages and other operating expenses (1,200,000)
Cash payments for insurance (100,000)
Cash payments for taxes (400,000)
Net cash provided – operating activities 600,000
Q2 Answer b
Cash receipts from repayment of loan made to another entity 2,200,000
Cash payments to purchase land (800,000)
Net cash provided – investing activities 1,400,000
Q3 Answer c
Cash receipts from issuance of ordinary shares 4,000,000
Cash payments for dividends 200,000
Net cash provided – financing activities 3,800,000
Q4 Answer b
Cash balance beginning 3,500,000
Net cash provided – operating activities 600,000
Net cash provided – investing activities 1,400,000
Net cash provided – financing activities 3,800,000
Cash balance – ending 9,300,000
Problem 42-4
Capiz Company provided the following for the current year:
Increase in long term debt 5,000,000
Purchase of treasury shares 1,000,000
Depreciation and amortization 1,500,000

Proceeds from issuance of share capital 4,000,000
Purchase of equipment for cash 7,000,000
Payment of cash dividend 2,500,000
Increase (decrease) in working capital accounts
Accounts receivable 2,000,000
Inventory (3,500,000)
Trade accounts and notes payables 4,000,000
Income tax payable (4,500,000)
Cash balance – January 1 6,000,000
a. 10,000,000
b. 11,000,000
c. 7,500,000
d. 8,500,000
a. 7,000,000
b. 5,000,000
c. 9,000,000
d. 2,000,000
a. 9,000,000
b. 8,000,000
c. 5,500,000
d. 2,500,000
4. What is the net cash balance at year end?
a. 16,500,000
b. 10,500,000
c. 21,500,000
d. 26,500,000
Solution 42-4
Q1 Answer a
Increase in accounts receivable (2,000,000)
Decrease in inventory 3,500,000
Increase in accounts and notes payable 4,000,000
Decrease in income tax payable (4,500,000)
Depreciation and amortization 1,500,000
Gain on sale of equipment ( 500,000)
Net cash provided – operating 10,000,000
Q2 Answer b
Purchase of equipment for cash (7,000,000)
Net cash used – investing (5,000,000)
Q3 Answer c
Increase in long term debt 5,000,000
Purchase of treasury shares (1,000,000)
Proceeds from issuance of share capital 4,000,000

Payment of cash dividend (2,500,000)
Net cash used – financing 5,500,000
Q4 Answer a
Cash balance – January 1 6,000,000
Net cash provided – operating 10,000,000
Net cash used – investing (5,000,000)
Net cash used – financing 5,500,000
Cash balance – December 31 16,500,000
Problem 42-5
Debbie Company provided the following data:
2015 2014
Cash 350,000 150,000
Accounts receivable, net 840,000 580,000
Merchandise inventory 660,000 420,000
Prepaid expenses 50,000 100,000
Long term investment 80,000 -
Property, plant, equipment 1,130,000 600,000
Accumulated depreciation 110,000 50,000
Accounts payable 530,000 440,000
Accrued expenses 140,000 130,000
Dividend payable 70,000 -
Note payable – long term debt 500,000 -
Share capital 1,200,000 900,000
Retained earnings 560,000 330,000

Net credit sales 6,400,000 4,000,000
Cost of goods sold 5,000,000 3,200,000
Expenses 1,000,000 520,000
Net income 400,000 280,000
All accounts receivable and accounts payable relate to trade merchandise.
Accounts payable are recorded net and always paid to take all of the discounts allowed.
The allowance for doubtful accounts at the end of 2015 was the same as at the end ofd
2014. No receivable were charged against the allowance during 2015.
The proceeds from the note payable were used to finance a new store building.
Share capital was sold to provide additional working capital.
1. What is the amount of cash collection from customers in 2015?
a. 5,560,000
b. 5,850,000
c. 6,140,000
d. 6,400,000
2. What is the amount of cash provided by operating activities?
a. 4,670,000
b. 4,910,000
c. 5,000,000
d. 5,150,000
a. 400,000
b. 100,000
c. 200,000
d. 110,000
a. 140,000
b. 300,000
c. 500,000
d. 700,000
5. What is the net cash used in investing activities?
a. 80,000
b. 530,000
c. 610,000
d. 660,000
Solution 42-5
Q1 Answer c
Accounts receivable – 2014 580,000
Credit Sales – 2015 6,400,000
Total 6,980,000
Accounts receivable – 2015 ( 840,000)
Collections in 2015 6,140,000
Q2 Answer d
Inventory – 2014 420,000
Purchases (SQUEEZE) 5,240,000
Goods available for sale 5,660,000
Inventory – 2015 (660,000)
Cost of goods sold 5,000,000
Accounts payable – 2014 440,000
Purchases in – 2015 5,240,000

Accounts payable – 2015 530,000
Payment of accounts payable in 2015 5,150,000
Q3 Answer d
Net income 400,000
Increase in accounts receivable (260,000)
Increase in inventory (240,000)
Decrease in prepaid expenses 50,000
Depreciation (110,000 – 50,000) 60,000
Increase in accounts payable 90,000
Increase in accrued expenses 10,000
Net cash provided by operating activities 110,000
Q4 Answer d
Proceeds from note payable 500,000
Proceeds from share capital (1,200,000 – 900,000) 300,000
Dividends paid in 2015 (see below) (100,000)
Net cash provided by financing activities 700,000
Retained earnings 2014 plus net income (330,000 + 400,000) 730,000
Retained earnings 2015 (560,000)
Dividend declared in 2015 170,000
Dividends payable – 2015 (70,000)
Dividend paid in 2015 100,000
Q5 Answer c
Purchase of long term investment (80,000)
Purchase of PPE (1,130,000 – 600,000) (530,000)
Net cash used in investing activities (610,000)

Problem 42-6
Weaver Company provided the following data:
December 31, 1014 December 31, 2015
Trade accounts and receivable, net 840,000 780,000
Inventory 1,500,000 1,400,000
*Total sales were P12,000,000 for 2015 and P11,000,000 for 2014.
Cash sales were 20% of total sales each year.
Cost of goods sold was P8,400,000.
*Variable general and administrative expenses for 2015 were P1,200,000. The variable
expenses have varied in proportion in sales.
Variable expenses have been paid 50% in the year incurred and 50% the following year.
Unpaid expenses are not included in accounts payable.
*Fixed expenses, including P350,000 depreciation and P50,000 bad debt expense,
totaled P1,000,000 each year.
Eighty percent of fixed expenses involving cash were paid in the year incurred and 20%
the following year.
Each year there was a P50,000 bad debt estimate and a P50,000 write off.
Unpaid expenses are not included in accounts payable.
1. What is the cash collected from customers during 2015?
a. 12,010,000
b.12,060,000
c. 11,960,000
d. 11,890,000
2. What is the amount of purchases for 2015?
a. 9,800,000
b. 8,300,000
c. 8,500,000
d. 8,400,000
3. What is the cash disbursed for purchases during 2015?
a. 8,500,000
b. 8,270,000
c. 8,300,000
d. 8,200,000
4. What is the cash disbursed for fixed expenses during 2015?
a. 1,000,000
b. 1,400,000
c. 600,000
d. 800,000
5. What is the cash disbursed for variable expenses during 2015?
a. 1,200,000
b. 1,100,000
c. 1,150,000
d. 1,750,000
Solution 42-6
Q1 Answer a
Accounts receivable – 2014 840,000
Sales 2015 12,000,000
Total 12,840,000
Accounts receivable 2015 (780,000)
Write off (50,000)

Cash collections in 2015 12,010,000
Q2 answer b Q3 answer b
Inventory 2014 1,500,000
Purchases (SQUEEZE) 8,300,000
Goods available for sale 9,800,000
Inventory 2015 (1,400,000)
Cost of goods sold 8,400,000
Accounts payable 2014 950,000
Purchases 2015 8,300,000
Total 9,250,000
Accounts payable 2015 (980,000)
Payment of accounts payable in 2015 8,270,000
Q4 answer c Q5 answer c
Fixed expenses 1,000,000
Depreciation (350,000)
Bad debt expense (50,000)
Fixed expenses paid 2015 600,000
Variable expenses paid 2015
2015 (1,200,000 x 50%) 600,000
2014 (1,100,000 x 50%) 550,000
Total cash disbursement for variable expenses 1,150,000
Variable ratio (1,200,000 / 12,000,000) 10%
2014 variable expenses (10% x 11,000,000) 1,100,000

Problem 42-7
Stonewall Company provided the following comprehensive statement of financial

position at year end:
2015 2014
Cash 550,000 400,000
Accounts receivable 1,400,000 920,000
Investment, at cost 200,000 350,000
Plant 1,800,000 1,300,000
Accumulated depreciation (600,000) (450,000)
Share capital 1,500,000 1,000,000
An investment was sold for P250,000 during the year. There was no disposal of plant
during the year. The profit for the year was P600,000, after income tax expense of
P105,000. A dividend of P470,000 was paid on December 31, 2015.
1. What amount should be reported as net cash provided by operating activities?
a. 475,000
b. 470,000
c. 370,000
d. 570,000
2. What amount should be reported as net cash used by investing activities?
a. 500,000
b. 750,000
c. 250,000
d. 400,000
3. What amount should be reported as net cash provided by financing activities?

a. 500,000
b. 470,000
c. 970,000
d. 30,000
Solution 42-7
Q1 answer c
Net income 600,000
Gain on sale of investment (250,000-150,000) (100,000)
Depreciation (600,000-450,000) 150,000
Increase in accounts receivable (1,400,000-920,000) (480,000)
Increase in accounts payable (950,000-750,000) 200,000
Q2 answer c
Sale of investment 250,000
Purchase of plant (500,000)
Net cash used in investing activities 250,000
Q3 answer d
Issue of share capital (1,500,000-1,000,000) 500,000
Dividend paid (470,000)
Net cash provided financing activities 30,000
Problem 42-8
Divine Company provided the following statement of financial position on December 31,
2015 and 2014 and information relating to 2015 activities:
2015 2014
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 Shareholders’ Equity
Accounts payable and accrued liabilities 1,650,000 1,440,000
Short term debt 650,000 -
Share capital, P20 par 1,600,000 1,400,000
Retained earnings 1,880,000 980,000
Total liabilities and shareholders’ equity 6,520,000 4,320,000
*Net income for 2015 was P1,380,000.
*Cash dividends of P480,000 were declared and paid in 2015
*Equipment costing P800,000 and having a carrying amount of P300,000 was sold in
2015 for P300,000.
*A long term investment was sold in 2015 for P270,000. There were no other
transactions affecting long term investments in 2015.
*10,000 shares were issued in 2015 for P44 a share.
*The trading securities were purchased for a cash on December 31, 2015.

a. 1,380,000
b. 1,830,000
c. 1,280,000
d. 1,900,000
a. 2,230,000
b. 1,790,000
c. 1,730,000
d. 1,630,000
a. 610,000
b. 880,000
c. 910,000
d. 1,090,000
Solution 42-8
Q1 Answer c
Gain on sale of long term investment (270,000-200,000) (70,000)
Depreciation 500,000
Amortization of patents 20,000
Increase in accounts payable and accrued liabilities 210,000
Purchase of trading securities (600,000)
Net change in accumulated depreciation 0

Add: accumulated depreciation on equipment sold
(800,000-300,000) 500,000
Total depreciation 500,000
Q2 answer a
Sale of long term investment 270,000
Purchase of PPE (2,200,000)
Sale of equipment 300,000
Net cash used in investing activities 1,630,000
PPE 2014 2,000,000
Purchase of PPE (SQUEEZE) 2,200,000
Total 4,200,000
Cost of equipment sold (800,000)
PPE 2015 3,400,000
Q3 answer a
Proceeds from short term debt 650,000
Issue of shares (10,000 x 44) 440,000
Cash dividend paid (480,000)
Net cash provided in financing activities 610,000
Problem 42-9
Flax Company used the direct method to prepare the statement of cash flows. The
entity provided the following information:
2015 2014
Cash 350,000 320,000
Accounts receivable, net 330,000 300,000

Inventory 310,000 470,000
Property, Plant and Equipment 1,000,000 950,000
Unamortized bond discount 45,000 50,000
Cost of goods sold 2,500,000 3,800,000
Distribution Cost 1,415,000 1,720,000
General and administrative expenses 1,370,000 1,513,000
Interest expense 43,000 26,000
Income tax expense 204,000 612,000
7,567,000 9,761,000
Allowance for doubtful accounts 13,000 11,000
Accumulated depreciation 165,000 150,000
Trade accounts payable 250,000 175,000
Income tax payable 210,000 271,000
Deferred tax liability 53,000 46,000
8% callable bonds payable 450,000 200,000
Ordinary share capital 500,000 400,000
Share premium 91,000 75,000
Sales 5,388,000 7,787,000
7,567,000 9,761,000
The entity purchased P50,000 equipment during 2015.
The entity allocated 1/3 of depreciation expense to distribution costs and the remainder
to general and administrative expenses.
What amount should be reported in the statement of cash flows for the year ended
December 31, 2015 for the following:
1. Cash collected from customers?

a. 5,418,000
b. 5,416,000
c. 5,360,000
d. 5,358,000
2. Cash paid for goods to be sold?
a. 2,585,000
b. 2,575,000
c. 2,425,000
d. 2,265,000
3. Cash paid for interest?
a. 48,000
b. 43,000
c. 38,000
d. 17,000
4. Cash paid for income tax?
a. 258,000
b. 204,000
c. 197,000
d. 150,000
5. Cash paid for distribution costs?
a. 1,420,000
b. 1,415,000
c. 1,410,000
d. 1,400,000
Problem 42-10
Beal company reported the following differences in the statement of financial position
accounts on December 31, 2015 and 2014:
Increase/ (decrease)
Assets
Cash and cash equivalents 120,000
Short term investment 300,000
Accounts receivable, net -
Inventory 80,000
Long term investment (100,000)
PPE 700,000
Accumulated depreciation -
1,100,000
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities (5,000)
Dividend payable 160,000
Short term bank debt 325,000
Long term debt 110,000
Ordinary share capital, P10 par 100,000
Share premium 120,000
Retained earnings 290,000
1,100,000
The following additional information relates to the current year:
 Net income for the current year was P790,000

 Cash dividend of P500,000 was declared
 Equipment costing P600,000 and having a carrying amount of P350,000 was
sold for P350,000
 Equipment costing P110,000 was acquired through issuance of long term debt
 A long term investment was sold for P135,000. There were no other transactions
affecting long term investment
 10,000 ordinary shares were issued for P22 a share.
a. 1,160,000
b. 1,040,000
c. 920,000
d. 705,000
a. 1,005,000
b. 1,190,000
c. 1,275,000
d. 1,600,000
a. 20,000
b. 45,000
c. 150,000
d. 205,000
Solution 42-10
Q1 answer c
Net income 790,000
Gain on sale of investments (135,000-100,000) (35,000)
Depreciation 250,000
Decrease in accounts payable and accrued liabilities (5,000)

Accumulated depreciation – net change -
Add back: accumulated depreciation on building sold
(600,000-350,000) 250,000
Total increase of depreciation for current year 250,000
Q2 answer a
Purchased of short term investments (300,000)
Sale of long term investments 135,000
Purchased of PPE (1,190,000)
Sale of equipment 350,000
Net cash used in investing activities 1,005,000
PPE net increase 700,000
Add back: cost of the equipment sold 600,000
Total 1,300,000
Less: equipment acquired through issuance of
long term debt 110,000
Cash paid for PPE 1,190,000
Q3 answer d
Cash dividend paid (340,000)
Proceeds from short term debt 325,000
Proceeds from issue of ordinary shares
(10,000 x 22) 220,000
Net cash provided in financing activities 205,000

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Cash Flow – Investing and Financing

 Acquired 2000 shares of Maybel Company for P2, 600, 000.

Solution 41-1 Answer d

Purchase of investment (2,600,000)

Sale of investment 3,500,000

Acquisition of 4-year certificate of deposit (5,000,000)

Net cash used in investing activities (4,100,000)

Jackson Company provided the following information at year end:

Equity investment at fair value through OCI 40,000 0

Accounts receivable 420,000 290,000

Inventory 330,000 210,000

Noncurrent assets 565,000 300,000

Accumulated depreciation 5000 25,000

Solution 41-2 Answer c

Increase in equity investment at FVTOCI 40,000

Increase in noncurrent assets (565,000 -300,000) 265,000

Total cash outflows- investing 305,000

The charges in accounts receivable and inventory should be included in determining

Solution 41-3 Answer d

Cash paid for purchase of building (400,000)

Cash paid for purchase of land (350,000)

Net cash used – investing (750,000)

The debt-equity swap is disclosed as a financing activity. The borrowing of P550,000 is

The purchase of inventory of P300,000 is operating and the dividend payment of

Equipment 250,000 increase

Accumulated depreciation 400,000 increase

Note payable 300,000 increase

Sale of equipment (carrying amount of 130,000 plus gain of 50,000) 180,000

Payment of equipment (200,000)

Net cash used in investing activities (20,000)

Net Income 3,000,000

Gain on sale of equipment ( 50,000)

Depreciation (400,000 + 120,000) 520,000

Net cash provided by operating activities 3,470,000

Prepaid rent 680,000

Financial asset at fair value through other comprehensive income 100,000

Bonds payable 500,000

Solution 41-5 Answer b

Proceeds from sale of equipment 1,770,000

Increase in patent ( 450,000)

Increase in financial asset at FVTOCI ( 100,000)

Net cash provided by investing activities 1,220,000

Original cost 4,000,000

Accumulated depreciation 2,400,000

Carrying amount 1,600,000

Gain on sale of equipment 170,000

Proceeds from sale of equipment 1,770,000

What is the depreciation for 2015?

Solution 41-6 Answer c

Accumulated depreciation – December 31, 2014 600,000

Depreciation for 2015 (Squeeze) 210,000

AD on property sold (50,000 – 40,000) 10,000

Accumulated depreciation – December 31, 2015 800,000

Matthew Company provided the following information:

Purchased of inventory 1,950,000

Purchased of land, with vendor financing of P1,000,000 for 2 years 3,500,000

Purchase of plant for cash 2,500,000

Carrying amount 500,000

Cash proceeds 400,000

Buyback of ordinary shares 700,000

Solution 41-7 Answer b

Purchase of land (3,500,000)