Krystal Guile Dagatan - Activity 2

Activity 2
Name: Krystal Guile N. Dagatan
Section: 3 BSAB-D
Activity 2.1: Based on the topic presented in lesson 1, answer the following questions.
(5points each)
1. What information are provided by the cash flow statement?
A cash flow statement summarizes all cash inflows generated by a company’s ongoing
operations and external investment sources. The cash flow statement includes cash
generated by the company through operations, investment, and financing, the total of
which is known as net cash flow.
2. What are the two methods used in cash flow preparation for operating activities? Explain each
method.
The indirect method begins with net income from the income statement then adds back
noncash items to arrive at a cash basis figure.
The direct method tracks all transactions in a period on a cash basis and uses actual cash
inflows and outflows on the cash flow statement.
3. What is an operating activity? financing activity? investing activity?
 Manufacturing, distributing, marketing, and selling are examples of operating activities

that provide the majority of the company's cash flow and have a significant impact on its
profitability.
 Investing activities involve the long-term use of cash, such as the purchase or sale of a
property or piece of equipment, as well as gains and losses from investments in financial
markets and operating subsidiaries.
 Financing activities include cash sources from investors or banks, as well as the uses of
cash paid to shareholders, such as dividend payments or stock repurchases, and loan
repayment.
4.Discuss the effect of the following changes in accounts on cash under the indirect method of
cash flow preparation for operating activities:
a) decrease in current assets
A decrease in Current Assets during the period increases cash flow from operating
activities.
b) increase in current liabilities
A Current Liability increase during the period increases Cash Flow from Operating
Activities.
C)decrease in current liabilities
A decrease in Current Liability during the period reduces Cash Flow from
Operating Activities.
d) increase in current assets
A Current Asset increase during the period decreases Cash Flow from Operating
Activities.
5. Discuss why the cash flow statement is important in financial management.
The cash flow statement is important because it measures cash inflows and outflows over
a given time period. This information is used to inform the company’s short- and long-
term planning.
6. As a reflection, how can a cash flow statement be helpful in managing
a) personal and
The personal cash flow statement calculates your net cash flow by comparing your cash
inflows (money you earn) to your cash outflows (money you spend).
b) business finances?
A cash flow statement summarizes the amount of cash and cash equivalents coming into
and going out of a business. The cash flow statement shows how well a company
manages its cash, including how well it generates cash. This financial statement is
intended to supplement the balance sheet and income statement.
Activity 2.2: Cash Flow Statement Preparation
Twitter Company shows a beginning cash balance of P395,000 and had
the following transactions:
a. The company issued shares of stocks worth P550,000
b. The company paid dividends of P365,000.
c. Applied and received a loan from Bank of the Philippine Islands worth P600.000.
d. Payments for salaries P95,000; rent P60,000; suppliers P215,000; other expenses P105,000
e. Total sales of P850,000 was recorded to which 55% was in cash and the
balance on account.
f. Interest payment of P85,000 while income tax paid was P90,000
8. Old equipment was sold for P375,000
h. New machineries were acquired at a cost of P425,000
Based on the above data, compute for cash:
(a) from operating
(b) from investing
(c) financing
(d) ending cash balance

Twitter Company
Cash Flow Statement
Cash Flow from (used in) Operating Activities
Payment of Salaries (95, 000)
Payment of Rent (60,000)
Payment of Suppliers ( 215,000 )
Other Expenses (105,000)
Total Sales 467,500
Interest Payment (85,000)
Paid Income Tax ( 90,000)
Net Cash Flow from Operating Activities (182,500)
Cash Flow from Investing Activities
Loan 600,000
Sales of Old Equipment 375,000
New Machinery (425,000)
Net Cash Flow from Investing Activities 550,000
Cash Flow from Financing Activities
Dividends Paid (365,000)
Stocks 550,000
Net Cash Flow from Financing Activities 185,000

Net Increase in Cash and Cash Equivalents 552,000
Cash at the beginning of the year 395,000
Cash at the end of the year 947,500
Activity 2.3: Short Cases on Cash Flow Preparation.
Sampagita Company is preparing its cash flow statement for 2018. The company ended 2017
with a cash balance of P135,000. During 2018, credit sales amounts to P680,000 and 75% of
which are expected to be collected. There are about P125,000 cash sales. Payments for the cost
of services are at P430,000. The purchase of new equipment is for P300,000, and Cactus
Company must make debt payments of P75,000. Cactus sells some excess land it has held for
several years for a cash price of P205,000. The company intends to sell stocksat P250,000 and
pay dividends of P55,000.
Prepare the company's cash flow for 2018.
Sampagita Company
Cash Flow Statement
2018
Cash Flow from Operating Activities
Credit Sales 515,000
Cash sales 125,000
Cost of services (430,000)
Net Cash Flow from Operating Activities P 205,000
Cash Flow from Investing Activities

Purchase of new equipment (P300,000)
Debt payments 75,000
Sale of excess land 205,000
Net Cash Flow from Investing Activities 20,000
Cash Flow from Financing Activities
Sale of stocks P250,000
Paid Dividends (55,000)
Net Cash Flow from Financing Activities 195,000
Net increase in cash and cash equivalents. P419,000
Cash at the beginning of the Year P135,000
Cash at the end of the Year P555,000

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Activity 2

Name: Krystal Guile N. Dagatan

1. What information are provided by the cash flow statement?

3. What is an operating activity? financing activity? investing activity?

 Manufacturing, distributing, marketing, and selling are examples of operating activities

b) increase in current liabilities

C)decrease in current liabilities

d) increase in current assets

5. Discuss why the cash flow statement is important in financial management.

6. As a reflection, how can a cash flow statement be helpful in managing

Activity 2.2: Cash Flow Statement Preparation

Twitter Company shows a beginning cash balance of P395,000 and had

the following transactions:

a. The company issued shares of stocks worth P550,000

b. The company paid dividends of P365,000.

f. Interest payment of P85,000 while income tax paid was P90,000

8. Old equipment was sold for P375,000

h. New machineries were acquired at a cost of P425,000

Based on the above data, compute for cash:

(a) from operating

(b) from investing

(d) ending cash balance

Cash Flow Statement

Cash Flow from (used in) Operating Activities

Payment of Salaries (95, 000)

Payment of Rent (60,000)

Payment of Suppliers ( 215,000 )

Other Expenses (105,000)

Total Sales 467,500

Interest Payment (85,000)

Paid Income Tax ( 90,000)

Net Cash Flow from Operating Activities (182,500)

Cash Flow from Investing Activities

Sales of Old Equipment 375,000

New Machinery (425,000)

Net Cash Flow from Investing Activities 550,000

Cash Flow from Financing Activities

Dividends Paid (365,000)

Net Cash Flow from Financing Activities 185,000

Cash at the beginning of the year 395,000

Cash at the end of the year 947,500

Activity 2.3: Short Cases on Cash Flow Preparation.

Prepare the company's cash flow for 2018.

Cash Flow Statement

Cash Flow from Operating Activities

Credit Sales 515,000

Cash sales 125,000

Cost of services (430,000)

Net Cash Flow from Operating Activities P 205,000

Cash Flow from Investing Activities

Debt payments 75,000

Sale of excess land 205,000

Net Cash Flow from Investing Activities 20,000

Cash Flow from Financing Activities

Sale of stocks P250,000

Paid Dividends (55,000)

Net Cash Flow from Financing Activities 195,000

Net increase in cash and cash equivalents. P419,000

Cash at the beginning of the Year P135,000

Cash at the end of the Year P555,000