-3.

Officers' salaries p 380,000

Sales salaries and commissions 520,000
Payment for salaries an d commissions p 900,000

4. Other operating expenses p 210,000

Add: Prepaid expenses, ending p 150,000
Acc. Operating expenses,end 150,000 300,000
Total p 510,000
Less: Prepaid expenses, beginning p 130,000
Acc. Operating expenses,end 252,000 382,000
Payments for other operating expenses p 128,000

5. Property, plant and equipment, end P2,000,000

Add: Cost ·ofland expropriated 500,000
Cost of equipment sold durip.g:the year 300,000
Total P2,800,000
Less property, plant and equipment, beg 1,900,000
Cost of equipment purchased during the year p 900,000

6. Retained earnings, beg Pl,615,000

Add profit 490,000
Total 2,105,000
Less retained earnings, end 1,717,500
Payments for dividends p 387,500

Note that cash received as dividends from Alpha Company is reported as an operating
activity because the income from investment in Alpha enters into the determination of profit or
joss. Many entities, however, report dividends and interest received under investing cash flows,
because they are considered as returns on investments.

XE RISE S

I. COMPREHENSIVE PROBLEM
An entity presented the following comparative financial information:

2017 2016

Property, plant and equipment 2,190,000 1,440,000

Accumulated depreciation 450,000 270,000
Long-term investments 225,000
Prepaid expenses 351,000 315,000
Merchandise inventory 1,950,000 1,260,000
Accounts receivable, net of 1,560,000 1,080,000
· allowance
Cash 690,000 640,000

127 IPag e
 Share capital-ordinary .
Retained earnings 3,000,00Q 2,400,000
Long-term note payable 906,000 688,000
Accounts payable l,'.2-7 5,000 T,095,000
• ·D~vid~nd payable
.309,000 282,000
Accrued expenses
201:'o'oo
825,000

. 2017 2016
Net credit sales
. 7,020,000 3,753,000
· Cost of goods sold
Gross profit
(3,91s;ooo) (1,881,000)
3,105,000 1,872;000
Expenses, including income tax
+(2,586,000) (1,374,000)
Net income
519,000 498,000
Acc~mnts re9_eivable and accounts payable relate to merchandise for sale in the normal course of ·
business. The allowance for bad debts was the same at the end of2017 and'2016 andno receivables
were charged against the allowance.

Accounts payable are recorded net of any discount and are always paid withjn the discount period.

The proceeds from the note payable were used to finance the acquisition of property, plant and
equipment. Ordinary shares were sold to provide additional working capital.

.1. What amount should be reported as net cash provided by operating activities in 2017?
' N' ''"" .
ra' 345,000 'r,ffa.«:" fl,f Ut(.~-\.oY,..) , C.4fot.)
\.!Y Ito( j.., , .. ". (1"";00)0-IZc;ocoo) (CCi6/t)
b . . 165,000 ,... < i.-- r. c.. f . (3f)<)Oo •3,soov) (")!,Jc)
C._ 546,000 _ 1 p f I fc,«
d. 510,000 :., ~" ,., :I:.~
ft< • ...,\ p.·-.,.l-e.1 c...., O~A~ '-¥.,.·.,.h~ ),U.k
2. What amount should be reported as net c~ ttJed m investing activities in 2017? ( )
f~hG.J< o" lo", ft.,,,... (r.~-t~J, •u·s-k_
a. 750,000
b. 225,000 ~ro..,,.r< on TPf.,.. (t, /"'IO, ~oo •\,~4fo, oc>,) (1,0~)
(c.) 975,000
c( 750,000 (V. Co.,~ ~def~ ~ - \V\~u~~ f\(,,tv,li~. (CHO)
-:::::::
3. What amount should be reported as net cash provided by financing activities in 2017?
· '1b(rrdis /\()~ fo.:1°'~<- (tz.1tooo~ooo) ~~t:.
a. 600,000 f~i'cds &.,"1 ,~ -~,.,f.,,,._' n.., ~-~..o
-"~F-
Coo r:
b. 780,000 . . ' I . '" '2011 .
C. 750,000 l~\}lcAW} r~"" I ~"(An..;"#i ~,,1Nl
( l,00 i)

, J'i 6~0,000 (\t<\ OI.S11 ~-.d, d J.

--=
l.7 ~•fd t ~i'W\t~)" 1.o\~ +~(,\- W\~P"t. I, 2-01 Loo.,
,-~,f\ ed <,c,1.t"";" 91 7.o 11
-
(_t(t)C, I ()uO)
----
-- 0,,13
128 IPa ge f)' · .J
1'1V1c;.,Ol'-J.J 0\Q(.C.I~<"
_ I. i"'- 1o\1 ·'!)o\

~o)
t'{P\:-
L
 II. Cash Flow from Operating Activities - Indirect Method

BSAC Company has net income of PS00,000. The following other infonnation.pertaining to the
company

l\t-'i \roe,~ ~o 1000 ·

Depreciation expense P300,000
Bad Debts expense
. ', ' . k100,ooo .
Investment income from Manelli Company (20% o~ership) . -t20,obo
Gain on sale of asset : '· ,'' · ·" ·_ 000,000,
Increase in Accounts receivable 00,000}
Increase in Accounts payable ,t-P40,000
Decrease in accrued expenses < Pso)poo)

Required: How much is the ~ash flow from operating activities? -:+~ :1go ,ooo
III.Cash Flow from Operating Activities - Direct Method

The following is Deadpool Company' s conde11.s.ed i~_co1!1e statement:

Sales P.1,000,000
Cost of Goods Sold 600,000 ; ., ,. .. ,
Gross Profit 400,000
Less: Operating expenses
: Depreciation expense 50,000
Bad Debts expense 30,000
· Other operating expenses 20,000
' Net Income P 300,000

The following are other information pertaining to Deadpool Company:

I'd lt11011( 1' ~ )O'l MO

Increase in accounts receivable ' ( _p 50,000)

Increase in allowance for doubtful accounts 20,000
Increase in accounts payable • 20,000
Decrease in JiCCrued expenses 10,000)
Increase in prepaid expenses , 5,000)
~- 5,000

I
Decrease in inventory
Required: Determine the cash received from customers, cash paid to suppliers, cash paid for
other operating expenses, and cash flow from operating activities.
t11l-c,t
'-"- ·,,. ":".
\"
(co\t.,2..
Lot.,s C,ool- .
Ou,~ \-,.-1 ( <.¥..)
\ i>~<.,
(~,
O\'V~~~,f·~ ~•
fl"!
( :ft$\\ "1$0~ \tf\(. I" fl1' t'l,-0¥-) \le fl-••(!
~,.,.. vlft\01'1.f (,tthf"":.c li- r,S'\C-- ;II\
-,=- , ... •.J
129 l page '"fr':tA ~""'f~"1 ~"' -;
. lDt
IV. Cash Flow from Investing Activities

Eloquence Company had the following activities during 2012:

• Acquired eyhare capita l of an other enti ty for P2,000,000.
• Sold an investment with carrying amount of P2,000,000 for Pl ,500,000.
• Acquired a P5 ,000,000 one-year certificate of deposit from a bank. During the year,
interest
• of P500,000 was received from the bank.
• Collected dividends of P300,000 on share investments.

Required
What amount should be reported as net cash used in investing activities? l·S'" fl'\

V. · Cash Flow from Financing Activities --

(s-n-i )
( '3•S'flll)
-:::::--
l?uring 2012, Dreamer Company has the following activities related to its financial operations:

Payment for the early retirement oflong-term bonds payable

(carrying amount of bonds payable, P5,000,000) P4,000,000
·, Payment in 2012 of cash dividend declared in 2011 2,000,000
)~reference share capital converted into ordinary share capital-hot\ coi,i.. 1,000,000
,Proceeds from sale of treasury shares (cost, Pl ,000,000) ~A 1,500,000 .

l\,{..-1-
~equired
(;,\~lo\ .JfU
· What amount should be rep01ied as net cash used in financing activities in 2012?
i." f!Pr •"
"'1P \'l
VI. An entity provided the following transactions for the preparation of a statement of cash
flows for the current year:

Net Income for the current year · 0 rt t . 6,000,000

Cash dividend paid .. :f-A , 5,000,000
Cash Received from sale of equipment costing Pl ,000,000 with
carrying l t\ t soo,ooo
amount of P600,000
Loss on sale of equipment 01\'t to0,000
Cash paid for equipment purchased 1~-2,000,"000
Issued bonds payable at face amount in exchange for land 3,000,000
Share in net income of associate OPt- 600,000
Dividend income received from associate 'l~-t 200,000
Cash paid for note payable to bank •. · f'~ l ,500,000
Cash received from issue of share capital with par value of l>3 ,000,000 i&ft-\-3 ,500,000
Cash paid for treasury share ,. t~- 500,000
Cash balance on January l · 5,500,000

130 IP age
r

Changc-S in ce rtai n an:ount s during the year

Financial asset hdcl for trnding

61r r 2,500,000 increase
Accounts Receivable. net of allowance for doubtful Of+-_ 1,000,000 Increase
accounts
Inventory
O~ 1,800,000 decrease
Accumulated Depreciation
Patent D 500,000 Increase
Accounts Payable 1tr t 700,000 'Decrease
Deferred Tax Liability o~t 300,000 Increase
Oft: t 200,000 In"crease
Required: . :
.. t SOO\r-+ loot-·. -G.~ -t ic:.ot-,tSt)l:>f- .\-z.,-tl'\
I. What 1s the net cash provided by operating activities? t" ,oo 'IC - ~ ¥ ,.,..., r

2. What is the net cash used in investing activities? ~\:1~._ - t" 1 · 0 q~ C..~f}
. 3. What is the net cash used in financing activities? ( C'.-i )- \ · 1'"1· ~"' .-Sooy< ;; [~-~..,,.)
4. What is the cash balance on December 31? \ •1"" t ?'f'\ ' Jl '2,""
ent year:
\'.II. An entity provided the following information for the
curr
t ~00,000
Oft- Dividend received
O·lt· Dividend paid
- 1,000,000
·Pr Cash re~eived fron:i customers -t 9,000,000
· ~." ..Cash paid to suppliers
o.,. _Interest received ..-6,000,000
,t- 200,000
CJ.,. .Interest paid on long-term debt ... 400,000
Proceeds from issuing share capital
t 1,500,000
\. It Proceeds from sale of long-term investments
-t2,00b,000
l · 11 Cash paid for equity investment at FVOCT -soo,ooo
o,f'r Income taxes paid
- 300,000
I •ft Proceeds from long-term debt 13,000,000

Required:

1. What is the net cash provided by operating activitie~ J I

ot>O ~oo;;,

2. What is the net cash provided by investingactivities?1 I, 'loo 1

000

3. ~at is the net cash I?rovided by financing activities?1111:Do ,ODO

VIU. During the year, an entity had the following activities:

131 / Page '

 Payment for the early retirement of long-term bonds payable of .ir,600,000
P5,000,000
Payment of cash dividend decl ared in prior year Z,000,000
Preference share capital converted in to ordinary share capital I\•" ,6f4\ f.,4 . 1,900,000
Proceeds from the sale of treasury shares (cost of treasury shares )<"500,000
Pl,000,000

Required: What amount should be reported as net cash used in financing activities?
f)

IX. An entity had the followi ng activities during th e current year:

. d share capita
A cqurre . -, ~ -·"' 1 /t, t
. 1o f another entity 2,000,000
Sold an investment with carrying amount of P2,000,000 1 1,500,000
5,000,000
Interest on the deposit received fro m the bank o~-,
Acquired a one-year certificate of deposit from a bank /

Collected dividends on share investments -t Or,-.~·"1 r+v

pre-Ir 500,000
300,000

Required: What amount should be reported as net cash used in investing activities?
\ I S'Oo 1 q0o
Wow!
Keep it up !
l;..-----
$" ,o~o (c,c,o)

End of Lesson 7 1 5'oo ooO

-;:?"

132 JP ag e