Cfas Cash Flow Theories and Problems
Cfas Cash Flow Theories and Problems
Cfas Cash Flow Theories and Problems
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
2. The following are examples of investing activities presented in the statement of cash flows except
a. Cash receipts from repayments of advances and loans made to other parties.
b. Cash receipts from sale of equity or debt instruments of other entities.
c. Cash receipts and payments for securities held for trading.
d. Cash advances and loans to other parties other than advances and loans made by financial institutions.
10. Cash advances and loans made by financial institutions are classified as
a. Investing activities
b. Operating activities
c. Financing activities
d. Lending activities
11. Cash flows arising from income taxes should be separately disclosed and should be included in
a. Operating activities
b. Investing activities
c. Financing activities
d. Lending activities
12. Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method
in:
a) The cash flows from financing activities section
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15. The indirect method of preparing the statement of cash flows begins with
a) Collections from customers
b) Cash sales
c) Net income
d) Beginning Cash Balance
16. Under IFRS, an entity can report finance costs in the statement of cash flows
a. in operating activities.
b. either in the operating activities or financing activities.
c. in financing activities.
d. in investing activities or financing activities.
17. The change in accumulated depreciation on factory equipment would be reported in the statement of cash flows
prepared by the indirect method in:
a) The cash flows from financing activities section
b) The cash flows from investing activities section
c) The cash flows from operating activities section
d) Not reported as it is not a cash flow
21. Below are the examples of cash flows from operating activities except:
a. Cash payment to settle trade accounts and notes payable
b. Cash receipts from issuing loans, notes and bonds
c. Cash receipts and payments for securities held for trading
d. Cash receipts from royalties, rental fees, commissions and other revenue
22. Cash payments to settle such obligations as trade accounts and notes payable are
a. Cash outflow for financing activities.
b. Cash outflow for investing activities
c. Cash outflow for operating activities.
d. Cash inflow from financing activities.
23. Statement 1: Cash advances and loans made by a financial institution are classified as financing activities.
Statement 2: Unearned loss from holding equity securities are reported as cash outflow to financing activities.
a. Both statements are correct.
b. Only statement 1 is correct.
c. Only statement 2 is correct.
d. Both statements are incorrect.
27. Which of the following methods of reporting cash flows from operating activities adjusts net income for revenues and
expenses not involving the receipt or payment of cash?
A. Direct method
B. Purchase method
C. Reciprocal method
D. Indirect method
28. Name five common major classes of operating cash receipts or operating cash payments presented on
the statement of cash flows when the cash flows from operating activities are reported by the direct method.
A. Cash received from customers, cash payments for merchandise, cash payments for operating
expenses, cash payments for interest, cash payments for income taxes.
B. Depreciation, amortization, cash received from customers, cash payment for income taxes and cash payment for
interest
C. Both A and B
D. No answer
29. It contains the cash flows derived primarily from the principal revenue producing activities of the entity which arises
from the purchase and sale of dealing or trading securities.
a. Investing activities
b. Financing activities
c. Statement of Cash Flows
d. Operating activities
30. On the other hand, the cash flow is considered under the Investing activities when
a. It is derived from the equity capital and borrowings of the entity
b. It is derived from the acquisition and disposal of long term assets
c. It results from transactions that enter into the determination of income or loss
d. It settles such obligations as trade accounts and notes payable, income tax payable or accrued expenses.
31. It reports the inflows and outflows of cash during the period.
a. Statement of Financial Position
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32. Investing activities includes cash flows from transactions involving nonoperating assets. For example:
a. Cash receipts from sales of equity or debt instruments of other entities
b. Cash payments to acquire treasury shares
c. Cash payments for amounts borrowed
d. Cash receipts from issuance of ordinary shares
33. All of these are major advantages of the indirect method of reporting cash flows from operating activities, except
A. It focuses on the differences between net income and cash flows from operating activities
B. The data needed are generally more readily available
C. Less costly to obtain than is the case for the direct method
D. More specific compare to direct method
34. Statement A: Equity Securities don’t have maturity date so they qualify as cash and cash equivalents
Statement B: Preference Shares with specified redemption date and is acquired 3 months before the redemption date
can be qualified as a cash equivalent
a. Statement B only
b. Statement A only
d. Neither A& B
35. Cash flows from operating activities are the following except:
d. Cash receipts and payments for securities held for dealing and trading purposes
36. Statement A: Cash flows that arise from the sale of trading securities are classified as investing activities
Statement B: Cash flows and advances made by a financial institution are usually identified as a financing activity
a. Statement B only
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b. Statement A only
d. Neither A or B
c. cash flows from the sale and disposal of long term assets
38. Dividend received and interest received may be classified alternatively as cash flow from
a. financing activities. c. investing activities.
b. revenue activities. d. operating activities.
39. Under IFRS, the dividend received from share investments can be classified as
a. only as investing activity.
b. only as operating activity.
c. either an operating activity or financing activity.
d. either an operating activity or investing activity.
41. Cash loans and advances from bank overdraft should be reported in the statement of cash flows as
a. financing activities. c. investing activities.
b. operating activities. d. other significant noncash activities.
42. Operating activities are the cash flows derived primarily from the principal revenue producing activities of the entity.
These are all transactions of operating activities except
a. Cash payments to suppliers for goods and services
b. Cash receipts from royalties, rental, fees, commissions and other revenue
c. Cash receipts from sales of equity or debt instruments of other entities
d. Cash payments for selling, administrative and other expenses
43. Cash flows arising from the purchase and sale of dealing or trading securities are classified as
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a. financing activities
b. operating activities
c. investing activities
d. none of the above
44. Generally result from transactions and other events that enter into the determination of net income or loss.
a. financing activities
b. operating activities
c. investing activities
d. income and loss activities
45. Investing activities are the cash flows derived from the acquisition and disposal of long-term assets including cash
equivalent and investments. These are all transaction of investing activities except
a. Cash payments to acquire treasury shares
b. Cash receipts from sales of equity or debt instruments of other entities
c. Cash receipts from repayment of advances and loans made to other parties
d. Cash payments to acquire equity or debt instruments of other entities
46. What section of the cash flow statement would list where payments went?
a. Nowhere on the statement
b. Investment Section
c. Financial Section
d. Operating Section
48. Which of these sections of the cash flow statement is affected by the direct method?
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a. Financing
b. Operations
c. All sections are affected
d. Investments
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
What amount will the corporation report as the cash provided by Operating Activities on the cash flow statement?
a. 225,000 c. 253,000
b. 235,000 d. 252,000
2. Selton Co. reports the following for the year ended December 31,2022
2021 2022
Cash 22,000 44,000
Accounts Receivable 28,000 26,000
Inventories - 60,000
Prepaid Expenses 6,200 4,200
Land 30,000 10,000
Buildings 150,000 150,000
Accumulated Depreciation-Building (20,000) (40,000)
Equipment 89,000 101,000
Accumulated Depreciation-Equipment (12,000) (20,000)
Accounts Payable 30,000 33,000
Bonds Payable 140,000 100,000
Common Stock (P1) 100,000 170,000
Retained Earnings 23,200 32,200
Additional Information:
3. Soriano Corporation reported net income of 60,000. Indicated there was a Depreciation expense of 19,000 and the
following working capital accounts changed:
If Soriano Company uses IFRS reporting and the indirect method, what amount is their adjustments to reconcile net
income to net cash provided by or used in operating activities?
a. (18,300) c. 14,800
b. 18,300 d. (14,800)
4. Makiling Company had a net income of 20,000 and had the following adjustments
a. (5,000) c. none
b. 5,000 d. 12,000
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5. The ABC Company provided the following data in preparation for the Statement of Cash Flows:
December 31 January 1
6. Net cash flow from operating activities is 550,000, The following items are reported on the financial statements for
2019:
Patents 46,000
Increase in Prepaid Rent 4,000
Depreciation and Amortization 12,500
Cash dividends paid on ordinary 25,000
Decrease in Accounts Receivables 33,000
7. The following information have been taken from income statement and balance sheet of Rio Inc.
Income statement
Net income: $192,500
Depreciation expense: $62,500
Amortization of intangible assets: $20,000
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Using above information, what is the net cash flows from operating activities under indirect method?
a. 36, 000
b. 104,500
c. 192, 500
d. 297,000
What amount should Lopez recognize as net cash from investing activities in its statement of cash flows at December 31?
a. 15,000 c. 123,500
b. 75,000 d. 48,500
9. The Moo Company gave the following data for the preparation of the Statement of Cash Flows:
Depreciation 900,000
Using the indirect method, what amount should be reported as net cash provided by operating activities?
a. 680,000
b. 670,000
c. 600,000
d. 550,000
10. Moon Company had a net income of ₱ 6,500,000 for the year. The following balances are provided for the
preparation of the statement of cash flows for the year:
January 1 December 31
a. 6,270,000
b. 6,430,000
c. 6,570,000
11. The following activities occurred during the current year of Clark Company.
Sold an investment in Joe Company for Php 4,600,000 when the carrying value was Php 4,400,000.
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Acquisition of Php 6,000,000, 5-year certificate of deposit from a bank. During the year, interest of Php 485,000 was paid
to Clark Company.
a. 4,825,000
b. 4,905,000
c. 5,100,000
d. 5,000,000
Purchase of land (with vendor financing of Php 2,000,000 for 2 years) 4,500,000
a. 5,500,000
b. 5,600,000
c. 6,550,000
d. 4,300,000
13. The following information was taken from the financial records of the Bobby Company.
Net Income reported on the income statement for the current year was P134,800. Depreciation expense recorded on
buildings and equipment was P27,400 for the year.
Using the indirect method, the Cash Flows from Operating Activities section of the Statement of Cash Flows is
A. P158, 350
B. P153, 850
C. P275, 350
D. P237, 850
14. The following information was taken from the financial records of the Abbi Company.
A. P677,000
B. P687,000
C. P987,000
D. P577,000
15. If a loss of P15,000 is incurred in selling (for cash) office equipment having a book value of P50,000 the total amount
reported in the cash flows from investing activities section of the statement of cash flows is:
A. P22,000 C. P78,000
B. P35,000 D. P15,000
16. The Dahan Corporation was organized on January 15, 2018 and started operation soon thereafter. The company
cashier who acted as the bookkeeper had kept the accounting records unresponsibly. The manager suspects him of
defalcation and engaged you to audit his account to find out the extent of the fraud, if there is any.
On November 15 when you started the examination of the accounts, you find the cash on hand to be 25,700. From
inquiry at the bank, it was ascertained that the balance of the company's bank deposit in current account on the same
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date was 131,640. Verification revealed that the check issued for 9,260 is not yet paid by the bank. The corporation sells
at 40% above cost.
Your examination of the available records disclosed the following information:
Capital stock issued at par for cash 1,600,000
Real state purchased and paid in full 1,000,000
Mortgage liability secured by real state 400,000
Furniture and fixtures (gross) on which
there is still balance unpaid of 30,000 145,000
Oustanding notes due to bank 160,000
Total amount owed to creditors on open account 231,420
Total sales 1,615,040
Total amount still due from customers 426,900
Inventory of merchandise on November 15 at cost 469,600
Expenses paid including purchases 303,780
Based on the above and the results of your audit, compute for the following as of November 15, 2018:
1. Collections from sales
a. 2,041,940 c. 1,615,040
b. 1,188,140 d. 1,153,600
2. Payments from purchases
a. 922,180 c. 1,207,204
b. 1,391,780 d. 1,854, 620
3. Total cash disbursements
a. 2,340,960 c. 3,273,400
b. 2,810,560 d. 2,625,984
4. Unadjusted cash balance
a. 74,740 c. 537, 580
b. 722,156 d. 1,007,180
5. Cash shortage
a. 0 c. 859,100
b. 574,076 d. 389,500
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17. A piece of equipment was sold for P3,000. The original cost was P15,000 and the accumulated depreciation was
P10,000. Using the indirect method, what amount, if any, would appear in the operating activities section?
A. P0
B. P2,000
C. P3,000
D. P15,000
18. Year 2019, Alejandro Company reported a net loss of 75,000. The company’s only net income adjustments were
depreciation expense of 81,000 and increase in accounts receivable 8,100. What is the company’s net cash provided by
operating activities?
a. 2900 c. 19,100
b. (2,900) d. (19,100)
19. Land costing P78,000 was sold for P100,000 cash. The gain on the sale was reported on the income statement as
other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of
the land?
a) P22,000 c) P100,000
b) P78,000 d) P178,000
20. Moon company provided the following data for the preparation of statement of cash flows for the year ended
December 31, 2023:
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 on bank loan 450,000
Cash paid to repay the principal amount of bank loans 1,000,000
Cash collected from customers 10,000,000
Cash received from issuance of ordinary shares 1,200,000
Cash paid for dividends 2,000,000
Cash paid for income tax 1,350,000
Cash paid to purchase trading securities 1,000,000
d 4,200,000
21. An equipment which costs 860,000 with an accumulated depreciation of 235,000 was sold for 570,000. This
transaction will appear on their Statement of Cash Flows (Indirect Method) as:
a. Deduction on net income 55,000 and a 570,000 cash inflow from investing activities
b. Addition to net income 55,000 and a 570,000 cash inflow from investing activities
c. Deduction on net income 290,000 and a 570,000 cash inflow from investing activities
d. Addition on net income 290,000 and a 570,000 cash inflow from investing activities
22. Beta Company had net cash provided by operating activities of 2,950,000 for 2022. The following were also reported
by Beta Company in 2022:
23. Moira Co. reported a net income of 1,000,000 for the year 2021 along with the following :
Increase in Accounts Receivable 220,000
Increase in Accounts Payable 186,000
Increase in Inventory 148,000
Decrease in Non-Trade Note Payable 30,000
24. P-Nation Company acquired 17,000,000 as their net income for the year 2020. The following information are related
to P-Nation year 2020:
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Increase in inventory.................................43,250
Amortization of intangibles........................6,900
Decrease in accounts receivable...........87,560
Decrease in accounts payable.............100,770
Gain on sale of machine...........................20,600
Depreciation of building.........................545,010
What is the amount of net cash provided or used by operating activities for year 2020 of P-Nation?
a. 17,474,850
b. 16,323,610
c. 16,237,110
d. 16,538,950
A. P 168,250
B. P 167,563
C. P 340,890
D. P 435,033
26. Rainbow Corporation purchased land for P360,000. Later in the year, the company sold a
different piece of land with a book value of P180,000 for P120,000. How much is the loss on sale of the land?
A. P 50,000
B. P 70,000
C. P 60,000
D. P 90,000
27. The cost of merchandise sold reported on the income statement was P770,000. The
accounts payable balance decreased P44,000, and the inventory balance decreased by
P66,000 over the year. Determine the amount of cash paid for merchandise.
A. P 749,000
B. P 748,000
C. P 750,000
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D. No Answer
28. Sales reported on the income statement were P480,000. The accounts receivable balance
increased P54,000 over the year. Determine the amount of cash received from customers.
A. P 426,000
B. P 462,000
C. P 444,000
D. P 450,000
1. The information below has been provided by the Ramona Company for the year 2018.
Purchases of Plant Assets: P250,000
Proceeds from the sale of ordinary shares: P320,000
Receipts from the customers: P780,000
Purchases of inventories: P290,000
Proceeds from sale of land: P630,000
What is the cash provided (used) by investing activities for the year ended December 31,2018?
a. 90,000
b. 410,000
c. 380,000
d. 700,000
29. On 2017, the Duffer Company earned a net income of 1,750,000 which included a depreciation expense of 230,000.
Below are the following changes in the account balances of the company.
Increases:
Inventory 270,000
Accounts Payable 540,000
Accounts Receivable 620,000
Decreases:
Accrued Liabilities 200,000
Prepaid Insurance 350,000
b. 1,380,000
c. 1,320,000
d. 1,720,000
30. Mad Max Co. reported a net income of 640,000 for the year 2020. Included in the net income were depreciation
expense of 65,000 and a loss on sale of equipment of 2,500. On year 2020, the following accounts increased:
Accounts Receivables 190,000
Inventory 230,000
Prepaid Rent 175,000
Accounts Payable 75,000
What is the amount of cash provided by operating activities for Mad Max Co. for the year ended December 31,2020?
a. 57,500
b. 182,500
c. 187,500
d. 537,500
31. Avril L. Corporation had a net income for 2019 of 2,700,000. Below are the additional information:
Amortization of intangibles 320,000
Depreciation of equipment 110,000
Increase in accounts receivables 460,500
Increase in accounts payable 280,000
a. 3,169,500
b. 3,809,500
c. 3,429,500
d. 2,949,500
33. The net income reported on the income statement for the year was P55,000, and depreciation of fixed assets for the
year was P22,000. The balances of the current asset and current liability accounts at the beginning and end of the year
are as follows:
End Beginnin
g
Cash P65,00 P70,000
0
Accounts receivable 100,000 90,000
The total amount reported for cash flows from operating activities in the statement of cash flows, using the indirect
method, is:
A. P33,000
B. P55,000
C. P65,500
D. P77,000
34. Marissa Company had net income of 3,000,000 as of 2021. Additional information are as follows:
Depreciation of assets ……………………………………………………………. 200,000
Amortization of Intangibles ……………………………………………………….. 240,000
Increase in accounts receivables ………………………………………………… 420,000
Decrease in Accounts Payable …………………………………………………… 540,000
35. Lovelyne Inc. reported net income of 760,000 for the year ended December 31, 2020. Included in the income were
depreciation expense of 12,200 and a gain on the sale of equipment of 6,700. The equipment had an historical cost of
50,000 and accumulated depreciation of 34,000. Each of the following accounts increased during 2020:
Patent 5,500
Bonds Payable 12,000
Available-for-sale equipment 3,000
Prepaid Rent 4,200
What is the amount provide by or used by the investing activities of Lovelyne Inc. for the year ended December 31,
2020?
a. 17,200 c. 31,200
b. 22,700 d. 14,200
Kennison Company has cash in bank of $10,000, restricted cash in a separate account of
$3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should
report cash of
a. $9,000.
b. $10,000.
c. $12,000.
d. $13,000.
75. Kaniper Compan
37. Labio Inc. has cash in bank of 9,000, restricted cash in a separate account of 2,500, and a bank overdraft in an
account at another bank of 2,000. Labio should report cash of
a. 2,500. b. 9,000.
. 9,500. d. 11,500.
resh, Inc. had the following bank reconciliation at March 31, 2010:
Balance per bank statement, 3/31/10 $37,200
Add: Deposit in transit 10,300
47,500
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40. The net income of Helsinki Corporation for December 31, 2020 is 2,800,000. Net income is composed of 19,000
depreciation expense and 3,400 gain on sale of machinery. Machinery had an historical cost of 70,000 and accumulated
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depreciation of 23,000. Helsinki Corporation also incurred a loss of selling equipment of 2,000. It has an historical cost of
28,000 and 13,000 accumulated depreciation.
Helsinki Corporation's net cash provided or used by investing activities for the year end was
a. 2,736,600
b. 63,400
c. 54,800
d. 98,000
41. Hayi Company had equity transactions at year end 2021. Dividends paid was 200,000. Ordinary shares purchased
from Suhyun Co. was costing 1,960,000. Hayi Company also had a cash proceeds from selling investment in Bob Co. of
344,000.
What amount should Hayi Company recognize as net cash from investing activities?
a. 1,616,000
b. 1,416,000
c. 1,816,000
d. 1,960,000
42. In 2020, Robi Corporation has depreciation expense of 50,000, increase in inventory 65,000 and an increase of
13,000 in accounts receivable. What will be Robi Corporation's net cash provided (used) by operating activities if their net
income for the year is 122,000?
a. 88,000
b. 200,000
c. 150,000
d. 94,000
43. In the preparation of Marquina's cash flow statement for the year end 2020, the change in amounts available were
Increase of Accounts Payable..........................10,000
Increase of Prepaid Rent.....................................7,600
Decrease of Accounts Receivable..................32,500
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By this information above, what will be shown for net cash in operating activities by Marquina's Company upon earning
net income of 310,000?
a. 322,900
b. 307,900
c. 292,900
d. 309,100
44. The Ciao Company provides the following information about its activities in the year 2018.
What is the net cash provided/used by investing activities to be reported in the statement of cash flows of Ciao Company?
a. 45, 000
b. 228,000
c. 86, 000
d. 0
45. The Bella Company provides the following information for the year 2018:
1. Old plant asset sold for $164,000 and the gain on such sale was of $5,000.
2. Treasury stock purchased for $42,000.
3. Investment purchased for $25,000.
4. A new plant asset purchased for $115,000.
5. Common stock issued for $375,000
What is the net cash provided/used by investing activities for Bella Company using above information?
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a. 300, 000
b. 25, 000
c. 24, 000
d. 14, 000
46. The Tokyo Company uses indirect method for preparing its statement of cash flows. It reported a net income of
$100,000 for the year 2016.
During the year 2016, the working capital accounts were changed as follows:
What is the net cash provided (used) by operating activities using indirect method?
a. 115, 800
b. 15, 800
c. 0
d. 100, 000
47. Sergio Company provides only the following information for the year 2018:
What is the net cash provided (used) by operating activities of Sergio Company using indirect method?
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a. 72, 950
b. 77, 000
c. 2, 950
d. 4, 050
48. Lala Inc. on its year-end had a net income of P900,000. Additional information is as follows:
Purchase of land…………………………………………………700,000
What is the amount of net cash used in investing activities?
a. 510,000
b. 160,000
c. 245,000
d. 1,050,000
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