Ch 5 answers 2014.pdf

CHAPTER 5 THE STATEMENT OF CASH FLOWS PROBLEMS 5-1.

(CURRENCY COMPANY) Cash flows from operating activities Profit before income tax (780,000 +1,820,000) Adjustments for Depreciation expense Patent amortization expense Income from investment in subsidiary Interest expense Operating income before working capital changes Increase in accounts receivable Decrease in accounts payable Cash generated from operations Interest paid (100,000 – 18,000) Income tax paid (780,000 – 60,000) Net cash from operating activities

5-2.

750,000 270,000 (480,000) 100,000 P3,240,000 (340,000) ( 26,000) P2,874,000 (82,000) (720,000) P2,072,000

(YEN COMPANY) Cash flows from operating activities Collections from customers Payments to suppliers and employees Cash generated from operations Interest paid Income taxes paid Net cash from operating activities

5-3.

P2,600,000

P983,000 (675,000) P308,000 (82,000) (154,000) P 72,000

(PESO COMPANY) (a)

Indirect method

Cash flows from operating activities Profit before income tax Adjustments for Depreciation expense Operating income before working capital changes Decrease in accounts receivable Increase in inventories Decrease in accounts payable Increase in salaries payable Cash generated from operations Income tax paid (66,000 – 12,000) Net cash from operating activities (b)

P220,000 80,000 P300,000 50,000 (89,000) (46,000) 24,000 P239,000 (54,000) P185,000

Direct method

Cash flows from operating activities Collections from customers Payments to trade creditors Payments for salaries Cash generated from operations Income taxes paid Net cash from operating activities

P1,050,000 (715,000) (96,000) P 239,000 54,000 P185,000

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Chapter 5 – The Statement of Cash Flows

1,000,000 + 50,000 = 1,050,000 580,000 + 89,000 + 46,000 = 715,000 120,000 - 24,000 = 96,000 66,000 - 12,000 = 54,000

5-4.

(SWISS FRANC COMPANY) (a)

Direct method

Cash flows from operating activities Collections from customers Payments to trade creditors Payments for salaries Payments for insurance Cash generated from operations Income taxes paid Interest paid Net cash from operating activities

P6,220,000 (4,140,000) (720,000) (560,000) P 800,000 (252,000) (175,000) P373,000

6,100,000 + 120,000 = 6,220,000 3,700,000 + 280,000 + 160,000 = 4,140,000 820,000 - 100,000 = 720,000 380,000 + 180,000 = 560,000 288,000 – 18,000 – 40,000 + 22,000 = 252,000 120,000 + 30,000 + 25,000 = 175,000 (b)

Indirect method

Cash flows from operating activities Profit before income tax Adjustments for Gain on sale of equipment Depreciation expense Operating income before working capital changes Decrease in accounts receivable Increase in inventory Decrease in accounts payable Increase in prepaid insurance Increase in salaries payable Cash generated from operations Income taxes paid Interest paid paid Net cash from operating activities

P1,080,000 (100,000) 220,000 P1,200,000 120,000 (280,000) (160,000) (180,000) 100,000 P800,000 (252,000) (175,000 P373,000

5-5. Items that would be reported in the Statement of Cash Flows (indirect method) 1. Depreciation expense of P120,000 is added to profit before income taxes. 2. Net gain of P5,000 from sale of machine is deducted from profit before income taxes. (Gain of P9,000 from sale of machine A less loss of P4,000 from sale of machine B). 3. Under investing activities section, P29,000 is reported as a cash inflow of sale of machine (27,000 from machine A plus P2,000 from machine B). 4. Under investing activities, P250,000 is reported as a cash outflow for purchase of machine.

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Chapter 5 – The Statement of Cash Flows

5-6.

(DOLLAR COMPANY) (Indirect method) Dollar Company Statement of Cash Flows For year ended December 31, 2012 Cash flows from operating activities Profit Adjustments for Depreciation expense Operating income before working capital changes Decrease in accounts receivable Increase in inventory Decrease in accounts payable Net cash from operating activities Cash flows from investing activities Purchase of equipment Cash flows from financing activities Issue of ordinary share capital Cash dividends paid Net increase in cash Add cash balance, January 1 Cash balance, December 31

5-7.

P580,000 290,000 P870,000 110,000 (200,000) (90,000) P690,000 (880,000) P550,000 (260,000)

290,000 P100,000 42,000 P142,000

(EURO COMPANY) Euro Company Statement of Cash Flows For year ended December 31, 2012 Cash flows from operating activities Profit before income taxes Adjustments for Depreciation expense Gain on sale of plant assets Interest expense Income before working capital changes Increase in accounts receivable Increase in inventories Increase in prepaid rent Decrease in accounts payable Increase in salaries payable Cash generated from operations Interest paid Income taxes paid Cash flows from investing activities Proceeds from sale of plant assets Payments for purchase of plant assets Payments for purchase of investment in associate Cash flows from financing activities Receipts from issuance of ordinary share capital Receipts from issuance of notes Payments for dividends Increase in cash Add cash balance, beginning Cash balance, end

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P2,955,000 750,000 (300,000) 100,000 P3,505,000 (600,000) (150,000) (6,000) (285,000) 120,000 P2,584,000 ( 80,000) (281,800)

P2,222,200

P 800,000 (7,600,000) (4,000,000)

(10,800,000)

P5,000,000 6,000,000 (1,200,000)

9,800,000 P1,222,200 430,000 P1,652,200

Chapter 5 – The Statement of Cash Flows

(Direct method) Euro Company Statement of Cash Flows For year ended December 31, 2012 Cash flows from operating activities: Cash receipts from customers Cash payments for merchandise purchases Cash payments for salaries Cash payments for rent Cash payments for miscellaneous expenses Cash generated from operations Interest paid Income taxes paid Net cash from operating activities Cash flows from investing activities Proceeds from sale of plant assets Payments for purchase of plant assets Payments for purchase of investment in associate Cash flows from financing activities Receipts from issuance of ordinary share capital Receipts from issuance of notes Payments for dividends Increase in cash Add Cash balance, beginning Cash balance, end

5-8.

P8,600,000 (3,635,000) (1,980,000) (131,000) (270,000) P2,584,000 ( 80,000) (281,800) P2,222,200 P 800,000 (7,600,000) (4,000,000) P5,000,000 6,000,000 (1,200,000)

(10,800,000)

9,800,000 P1,222,200 430,000 P1,652,200

(RIYAL COMPANY) Riyal Company Statement of Cash Flows For year ended December 31, 2012 Cash flows from operating activities Profit for the year Adjustments for Depreciation expense Loss on sale of equipment Impairment loss on goodwill Amortization of discount on bonds payable Gain on sale of long-term investments Increase in accounts receivable Decrease in inventory Increase in accounts payable Increase in trading securities Net cash from operating activities Cash flows from investing activities Sale of equipment Purchase of property and equipment Sale of long-term investment Net cash flows from investing activities Cash flows from financing activities Receipts from issuance of ordinary share capital Payments for dividends Net cash flows from financing activities Increase in cash Add cash balance, beginning Cash balance, end

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P 480,000 600,000 80,000 100,000 50,000 (30,000) (500,000) 150,000 300,000 (100,000) P 1,130,000 P420,000 (1,900,000) 280,000 (1,200,000)

P1,000,000 (750,000) 250,000 P 180,000 620,000 P 800,000

Chapter 5 – The Statement of Cash Flows

5-9.

(RUPIAH COMPANY) Purchase of treasury shares Increase in long-term debt Depreciation expense Amortization of intangibles Loss on sale of equipment Gain on sale of land Proceeds from issue of ordinary share Purchase of equipment Proceeds from sale of equipment Proceeds from sale of land Payment of cash dividend Profit Increase in accounts receivable Decrease in inventory Increase in trade payables Increase in income tax payable Decrease in interest payable Impairment loss on equipment Cash balance, January 1, 2012 Cash balance, December 31, 2012

(1,000,000) 5,000,000 1,000,000 500,000 300,000 (200,000) 4,500,000 (6,000,000) 1,000,000 1,800,000 (2,000,000) 8,500,000 (2,000,000) 2,400,000 4,200,000 1,300,000 (700,000) 300,000 8,000,000 26,900,000

5-10. (BAHT COMPANY) Baht Company Statement of Cash Flows For the Year Ended December 31, 2012 Cash flows from operating activities Profit (loss) for the year Adjustments for Depreciation expense Amortization of premium on bonds Gain on equipment sale Gain on bond retirement Dividends on investment in associate Income from associates Increase in accounts payable Increase in revenue received in advance Increase in accounts receivable Decrease in prepayments Decrease in inventory Cash flows from investing activities Purchase of property and equipment Cash flows from financing activities Retirement of bonds Issue of share capital Purchase of treasury shares Payment of dividends Decrease in cash Add cash balance, beginning Cash balance, end

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P (20,000) 35,000 (5,000) (4,000) (10,000) 40,000 (65,000) 18,000 7,000 (20,000) 6,000 5,000

P(13,000) (30,000

(80,000) 60,000 (16,000) (25,000)

(61,000) P(104,000) 204,000 P 100,000

Chapter 5 – The Statement of Cash Flows

MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 MC5

D C A A C

MC6 MC7 MC8 MC9 MC10

C A D A C

MC11 MC12 MC13 MC14 MC15

D C D C A

MC16 MC17 MC18 MC19 MC20

D C D A A

Problems MC21 MC22 MC23 MC24 MC25 MC26 MC27 MC28 MC29 MC30 MC31 MC32

D C C B B D C D C D A C

MC33 MC34 MC35

A B D

MC36 MC37 MC38 MC39 MC40

C A D C A

MC41 MC42 MC43 MC44

B C C A

MC45

D

870,000 + 10,000 – 510,000 – 110,000 = 260,000 4,380,000 + 216,000 – 304,000 = 4,292,000 550,000 –500,000 + 125,000 = 175,000 250,000 + 550,000 – 600,000 – 450,000 = 250,000 200,000 + 500,000 – 250,000 = 450,000 750,000 – 29,000 + 21,000 + 15,000 = 757,000 260,000+40,000=300,000; 400,000–300,000=100,000; 100,000 +120,000-102,000 = 280,000 3,200,000 + 400,000 – 2,500,000 = 1,100,000 690,000-35,000-80,000+250,000+10,000+25,000+80,000 = 940,000 1,100,000 - 150,000 – 135,000 = 815,000 220,000 + 325,000 – 240,000 = 305,000 5,130,000 - 470,000 =430 ,000;1,820,000+80,000-1,700,000=200,000; 430,000–200,000=230,000+30,000 = 260,000 149,000-17,000+13,000=145,000; 840,000-53,000+32,000=819,000 3,600,000 + 2,500,000 – 1,550,000 – 2,910,000 = 1,640,000 910,000-40,000+70,000+50,000 = 990,000 990,000 – 60,000 – 50,000 – 90,000 + 30,000 = 820,000 30,000 – 5,000 = 25,000 264,000 + 25,000 = 289,000 820,000 – 25,000 -289,000 = 506,000 240,000-120,000= 120,000; 120,000 + 280,000 = 400,000 3,000,000+960,000–400,000=3,560,000;1,000,000+300,000–280,000 =1,020,00; 3,560,000 – 1,020,000 = 2,540,000 380,000 + 160,000 = 540,000 1,200,000 + 1,000,000 – 300,000 = 1,900,000 8,000,000 – 7,200,000 + 150,000 + 20,000 = 970,000 Acc. Depreciation of equipment sold = 300,000 + 74,000 – 25,000 – 283,000 = 66,000 Cost of equipment sold = 66,000 + 100,000 = 166,000 Equipment purchased = 925,000 + 166,000 – 780,000 = 311,000 Dividends declared = 500,000 + 1,000,000 – 710,000 – 20,000 = 770,000 Dividends paid = 22,000 + 770,000 – 34,000 = 758,000

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