Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977

FAR OCAMPO/OCAMPO
FAR.3041-Statement of Cash Flows MAY 2021

DISCUSSION PROBLEMS
1. “Cash flows” in the cash flow statement are 8. Company uses the direct method to prepare its
a. Inflows of cash and cash equivalents. statement of cash flows. The company had the
b. Outflows of cash and cash equivalents following cash flows during the current year
c. Inflows and outflows of cash Cash receipts from the issuance of
d. Inflows and outflows of cash and cash equivalents ordinary shares P400,000
Cash receipts from customers 200,000
2. The statement of cash flows provides answers to all of
Cash receipts from dividends on long-
the following questions except
term investments 30,000
a. Where did the cash come from during the period?
Cash receipts from repayment of loan
b. What was the cash used for during the period?
made to another company 220,000
c. What was the change in the cash balance during
Cash payments for wages and other
the period?
operating expenses 120,000
d. What is the impact of inflation on the cash balance
at the end of the year? Cash payments for insurance 10,000
Cash payments for dividends 20,000
3. Operating activities are Cash payments for taxes 40,000
a. The principal revenue-producing activities of the Cash payment to purchase land 80,000
entity and other activities that are not investing or
financing activities. The net cash provided by (used in) operating activities
b. The acquisition and disposal of long-term assets is
and other investments not included in cash a. P60,000 c. P30,000
equivalents. b. P40,000 d. (P20,000)
c. Activities that result in changes in the size and
composition of the contributed equity and 9. In preparing a statement cash flows using the indirect
borrowings of the entity. method, cash flows from operating activities
d. Original and planned investigation undertaken with a. Are always equal to accrual accounting income
the prospect of gaining new scientific or technical b. Are calculated as the differences between revenues
knowledge and understanding. and expenses
c. Can be calculated by appropriately adding to or
4. Entities are encouraged to report cash flows from deducting from net income those items in the
operating activities using income statement that do affect cash
a. The direct method, whereby major classes of gross d. Can be calculated by appropriately adding to or
cash receipts and gross cash payments are deducting from net income those items in the
disclosed. income statement that do not affect cash
b. The indirect method, whereby profit or loss is
adjusted for the effects of transactions of a non- 10. Word Corporation is preparing its statement of cash
cash nature, any deferrals or accruals of past or flows and has provided this information:
future operating cash receipts or payments, and Net income before taxes P400,000
items of income or expense associated with Depreciation on property, plant and
investing or financing cash flows. equipment 200,000
c. Either a or b. Loss on sale of building 100,000
d. Neither a nor b. Interest expense 150,000
Interest payable, beginning of the year 100,000
5. Interest paid may not be classified as cash outflow for Interest payable, end of the year 50,000
a. Operating activities Income taxes paid 100,000
b. Investing activities Accounts receivable, beginning of the
c. Financing activities year 500,000
d. None of the above Accounts receivable, end of the year 850,000
Inventory, beginning of the year 500,000
6. Interest and dividend received may not be classified as Inventory, end of the year 400,000
cash inflows from Accounts payable, beginning of the year 200,000
a. Operating activities Accounts payable, end of the year 500,000
b. Investing activities
c. Financing activities The net cash provided by operating activities is
d. None of the above a. P750,000 c. P600,000
b. P700,000 d. P500,000
7. Dividends paid to stockholders are reported on the
cash flow statement as 11. Using the indirect method, cash flows from operating
a. Both financing and investing activity activities would be increased by which of the following?
b. Financing activity a. Gain on sale of investments
c. Operating activity b. Increase in prepaid expenses
d. Investing activity c. Decrease in accounts payable
d. Decrease in accounts receivable

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EXCEL PROFESSIONAL SERVICES, INC.

12. Aklan Company reported net income of P10,000,000 a. Net cash inflow P155,000
for the current period. Changes occurred in several b. net cash inflow P212,000
balance sheet accounts during the period as follows: c. Net cash outflow P155,000
Investment in shares, carried d. net cash outflow P212,000
at equity P2,500,000 increase
Premium on bonds payable 500,000 decrease
Accumulated depreciation, 17. The transactions of Tsape Company for the current
caused by major repair 1,000,000 decrease year included the following:
Deferred tax liability 400,000 increase Cash borrowed from bank for purchase
of land P6,000,000
In the current period statement of cash flows, the cash
Purchase of land for cash 6,000,000
provided by operating activities should be
Sale of securities for cash 1,000,000
a. P7,400,000 c. P6,400,000
Dividend declared (of which P2,000,000
b. P9,400,000 d. P7,000,000
was paid during the year) 3,000,000
Issuance of ordinary shares for cash 7,000,000
13. Antique Corp. reported net income of P420,000 for the
Payment of bank loan including interest
current period. Changes occurred in several statement
of P500,000 3,500,000
of financial position accounts as follows:
Increase in customers’ deposits 500,000
Equipment P35,000 increase
Accumulated depreciation 56,000 increase The current year statement of cash flows should report
Note payable 42,000 increase net cash provided by financing activities at
a. P8,000,000 c. P8,500,000
Additional information:
b. P7,500,000 d. P7,000,000
• During the year, Antique sold equipment costing
P35,000, with accumulated depreciation of
P16,800, for a gain of P7,000.
Use the following information for the next five questions.
• In December of the current year, Antique
purchased equipment costing P70,000 with The following is a list of the items to be included in the
P28,000 cash and a 12% note payable of P42,000. preparation of the current year statement of cash flows for
• Depreciation expense for the year was P72,800. the Norhan Company:
In Antique's current period statement of cash flows, a) Net income, P59,200
net cash used in investing activities should be b) Payment for purchase of building, P98,000
a. P 2,800 c. P16,800 c) Increase in accounts receivable, P7,400
b. P30,800 d. P49,000 d) Proceeds from issuance of ordinary shares, P37,100
e) Increase in accounts payable, P4,500
14. Capiz Company had the following activities during the f) Proceeds from sale of land, P7,000
current period: g) Depreciation expense, P12,600
• Acquired investment in ordinary shares classified h) Payment of dividends, P36,000
as FA@VTOCI for P3,000,000. i) Gain on sale of land, P5,300
• Sold investment in trading securities for j) Decrease in inventory, P3,700
P4,500,000 when the carrying amount was k) Payment for purchase of long-term investments,
P3,800,000. P9,600
• Acquired a P5,000,000 one-year certificate of l) Amortization of discount on bonds payable, P1,900
deposit from a bank. During the year, interest of m) Proceeds from issuance of note, P18,000
P400,000 was received from the bank. n) Increase in deferred taxes payable, P5,000
• Collected dividends of P800,000 on investments in o) Equipment acquired by finance lease, P19,500
equity securities. p) Decrease in salaries payable, P2,300
q) Beginning cash balance, P20,300
In the current period statement of cash flows, net cash
used in investing activities should be
Compute for the following.
a. P8,000,000 c. P3,500,000
b. P6,800,000 d. P3,000,000
18. Cash provided by operating activities
a. P68,100 c. P74,900
15. Cash inflows from investing result from
b. P89,900 d. P71,900
a. Decreases in liabilities.
b. Increases in liabilities.
19. Cash used in investing activities
c. Decreases in noncurrent assets.
a. P120,100 c. P100,600
d. Increases in noncurrent assets.
b. P107,600 d. P 9,600
16. Warner Limited had the following cash flows during a
20. Cash provided by financing activities
reporting period:
a. P19,100 c. P20,600
• Acquisition of subsidiary, net of cash flows
b. P38,600 d. P 1,100
P250,000
• Dividends paid P65,000
21. Net decrease in cash
• Repayment of borrowings P90,000
a. P19,600 c. P13,400
• Interest paid on borrowings P57,000
b. P 6,600 d. P 9,600
• Proceeds from sale of plant P215,000
What is the amount of the cash flows in relation to 22. Cash balance, ending
financing activities of Warner Limited for the reporting a. P13,700 c. P 700
period? b. P10,700 d. P6,900

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SOLUTION GUIDE: 24. Net cash provided by operating activities.

a. P120,000 c. P140,000
Item Operating Investing Financing b. P130,000 d. P165,000
a
b 25. Net cash provided by (used in) investing activities.
c a. P10,000 c. (P90,000)
d b. (P100,000) d. (P340,000)
e
26. Net cash provided by (used in) financing activities.
f
a. P150,000 c. (P100,000)
g b. P350,000 d. (P250,000)
h
i 27. PAS 7 requires that investing and financing
j transactions that do not require the use of cash or
k cash equivalents should be
l a. Excluded from a cash flow statement
b. Included in a cash flow statement before
m
operating, investing and financing activities
n c. Presented in the cash flow statement after
o operating activities and before investing and
p financing activities
Net d. Presented in a cash flow statement after the
operating, investing and financing activities have
23. The first step in the preparation of the statement of been presented
cash flows requires the use of information included in
which comparative financial statements? 28. Which of the following items would be presented in a
a. Statements of cash flows cash flow statement?
b. Statements of financial position a. Payment of dividends through a share investment
c. Income statements scheme
d. Statements of retained earnings b. Acquisition of an investment in a subsidiary for
consideration consisting of an exchange of non-
current assets and liabilities
Use the following information for the next three questions. c. Refinancing of long-term debt
d. Proceeds from the issue of debentures
The statement of financial position data of Davao Company
at the end of 2020 and 2019 follow:
29. An entity purchases a building and the seller accepts
Increase
payment partly in equity shares and partly in
2020 2019 (Decrease)
debentures of the entity. This transaction should be
Cash P 125,000 P 175,000 (P50,000)
treated in the cash flow statement as follows:
Accounts receivable
a. The purchase of the building should be investing
(net) 300,000 225,000 75,000
cash outflow and the issuance of shares and the
Inventory 350,000 225,000 125,000
debentures financing cash outflows
Prepaid expenses 50,000 125,000 ( 75,000)
b. The purchase of the building should be investing
Buildings and
equipment 450,000 375,000 75,000 cash outflow and the issuance of debentures
Accumulated financing cash outflows while the issuance of
depreciation— shares investing cash outflow
buildings and c. This does not belong in a cash flow statement but
equipment (90,000) (40,000) 50,000 should be disclosed only in the notes to financial
Land 450,000 200,000 250,000 statements
P1,635,000 P1,285,000 P350,000 d. Ignore the transaction totally since it is a noncash
transaction. No mention is required in either the
Accounts payable P 340,000 P 275,000 P65,000 cash flow statement or anywhere else in the
Accrued expenses 60,000 90,000 ( 30,000) financial statements
Notes payable—
bank, long-term 200,000 (200,000)
30. PAS 7 requires an entity to disclose
Mortgage payable 150,000 150,000
a. The components of cash and cash equivalents
Share capital, P10
par 1,045,000 795,000 250,000 and shall present a reconciliation of the amounts
Retained earnings in its statement of cash flows with the
(deficit) 40,000 (75,000) 115,000 equivalent items reported in the statement of
P1,635,000 P1,285,000 P350,000 financial position.
b. Together with a commentary by management,
Land was acquired for P250,000 in exchange for ordinary the amount of significant cash and cash
shares, par P250,000, during the year; all equipment equivalent balances held by the entity that are
purchased was for cash. Equipment costing P25,000 was not available for use by the group.
sold for P10,000; book value of the equipment was c. Information about changes in its liabilities
P20,000 and the loss was reported as an ordinary item in arising from financing activities, including both
net income. Cash dividends of P50,000 were charged to changes arising from cash flows and non-cash
retained earnings and paid during the year; the transfer of changes (such as foreign exchange gains or
net income to retained earnings was the only other entry
losses).
in the Retained Earnings account.
d. All of these.
Compute for the following.
J - end of FAR.3041 - J

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