IA CASHFLOW ASSIGNMENT VALMADRID-Sheet1

PROBLEM #3: DIRECT METHOD
Deuce Company
Statement of Cash Flows
For the year ended December 31, 20x2
Cash Flows from Operating Activities

Cash receipts from customers 9,830,000
Cash receipts for rent income 850,000
Cash receipts for interest income 30,000
Cash paid to suppliers -5,120,000
Cash paid for insurance -190,000
Cash paid for other expenses -1,380,000
Cash generated from operations 4,020,000
Interest paid -190,000
Income taxes paid -630,000
Cash paid for the acquisition of held for trading securities -200,000
Net Cash from Operating Activities 3,000,000
Cash Flows from Investing Activities

Cash receipts from sale of old building 520,000
Cash payments for acquisition of building -4,600,000
Net Cash used in Investing Activities -4,080,000
Cash Flows from Financing Activities

Cash proceeds from issuance of share capital 2,000,000
Cash payment for dividends -620,000
Cash payment for short-term loan -100,000
Net Cash from Financing Activities 1,280,000
Net increases in cash and cash equivalents 200,000

Cash and cash equivalents, beginning 300,000
Cash and cash equivalents, end 500,000
Additional information (a): Allowance for doubtful accounts
Allowance for doubtful accounts

20,000
Write-offs 10,000 30,000
40,000
Accounts Receivable - gross

640,000
10,000,000 10,000
9,830,000 Collections
800,000
Additional information (b): Investment in bonds
Interest Income 40,000

Amortization of discount on
investment in bonds -10,000
Collection of interest income 30,000
Additional information (c): Other expenses and Depreciation
Accumulated Depreciation
400,000
1,000,000 1,000,000 Depreciation Expense
400,000
Other expenses 2,400,000

Depreciation expense -1,000,000
Impairment loss on Goodwill -20,000
Payment of Other Expenses 1,380,000
Additional information (d): Sale of old building
Cash 520,000
Loss on sale of building 80,000
Accumulated depreciation 1,000,000

Building 1,600,000
Investing Activites:
Cash of 520,000 proceeds from sale of old building is a cash inflow
Building
2,000,000
Acquisition 4,600,000 1,600,000
5,000,000
4,600,000, the acquisition cost of building is cash outflow
Additional information (e): Held for trading securities

200,000 cash outflow on operating activities
Additional information (f): Issuance of shares
2,000,000 cash inflow on financing activities
Cost of Sales:
Cost of sales 6,000,000

Inventory, end. 1,000,000
Inventory, beg. -1,800,000
Net purchases 5,200,000
Accounts payable, beg. 160,000

Net purchases 5,200,000
Accounts payable, end. -240,000
Payments to suppliers 5,120,000
Rent Income:
Rent income 900,000

Rent receivable, beg. 20,000
Unearned rent, end. 40,000
Unearned rent, beg. -60,000
Rent receivable, end. -50,000
Collections on rent 850,000
Insurance Expense:
Insurance expense 200,000

Insurance payable, beg. 90,000
Prepaid insurance, end. 100,000
Prepaid insurance, beg. -80,000
Insurance payable, end. -120,000
Payments 190,000
Interest Expense:
Interest expense 200,000

Amortization of discount on bonds
payable' -10,000
Payment of interest expense 190,000
Income Tax Expense:
Income tax expense (accrual) 600,000

Increase in Deferred tax liability -10,000
Current Tax Expense 590,000
Income tax payable, beg. 70,000

Current tax expense 590,000
Income tax payable, end. -30,000
Payment for tax 630,000
Dividends Payable
Retained earnings, beg. 250,000

Profit for the year 1,470,000
Retained earnings, end. -880,000
Dividends declared 840,000
Dividends payable, beg. 240,000

Dividends declared 840,000
Dividends payable, end. -460,000
Dividends paid 620,000
INDIRECT METHOD
Deuce Company
Statement of Cash Flows
For the year ended December 31, 20x2
Cash Flows from Operating Activities

Profit before tax 2,070,000
Adjusments for :
Depreciation expense 1,000,000
Impairment loss on goodwill 20,000
Loss on sale of building 80,000
Unrealized gain on held for trading securities -40,000
Interest income -40,000
Interest expense 200,000
3,290,000
Increase in accounts receivable, net -140,000
Increase in rent receivable -30,000
Decrease in inventory 800,000
Increase in prepaid insurance -20,000
Increase in accounts payable 80,000
Decrease in unearned rent -20,000
Increase in insurance payable 30,000
Interest received 30,000
Cash generated from operations 4,020,000
Interest paid -190,000
Income taxes paid -630,000
Cash paid for the acquisition of held for trading securities -200,000
Net Cash from Operating Activities 3,000,000
Cash Flows from Investing Activities

Cash receipt from sale of old building 520,000
Cash payment for acquisition of building -4,600,000
Net Cash used in Investing Activities -4,080,000
Cash Flows from Financing Activities

Cash proceeds from issuance of share capital 2,000,000
Cash payment for dividends -620,000
Cash payment for short-term loan -100,000
Net Cash from Financing Activities 1,280,000
Net increase in cash and cash equivalents 200,000

Cash and cash equivalents, beginning 300,000
Cash and cash equivalents, end. 500,000

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PROBLEM #3: DIRECT METHOD

Cash Flows from Operating Activities

Cash Flows from Investing Activities

Cash Flows from Financing Activities

Net increases in cash and cash equivalents 200,000

Additional information (a): Allowance for doubtful accounts

Allowance for doubtful accounts

Accounts Receivable - gross

Additional information (b): Investment in bonds

Interest Income 40,000

Collection of interest income 30,000

Additional information (c): Other expenses and Depreciation

Other expenses 2,400,000

Additional information (d): Sale of old building

Loss on sale of building 80,000

Accumulated depreciation 1,000,000

Cash of 520,000 proceeds from sale of old building is a cash inflow

4,600,000, the acquisition cost of building is cash outflow

Additional information (e): Held for trading securities

Additional information (f): Issuance of shares

2,000,000 cash inflow on financing activities

Cost of sales 6,000,000

Accounts payable, beg. 160,000

Payments to suppliers 5,120,000

Rent income 900,000

Collections on rent 850,000

Insurance expense 200,000

Interest expense 200,000

Income Tax Expense:

Income tax expense (accrual) 600,000

Current Tax Expense 590,000

Income tax payable, beg. 70,000

Payment for tax 630,000

Retained earnings, beg. 250,000

Dividends payable, beg. 240,000

Cash Flows from Operating Activities

Cash Flows from Investing Activities

Net Cash used in Investing Activities -4,080,000

Cash Flows from Financing Activities

Net increase in cash and cash equivalents 200,000

Cash and cash equivalents, end. 500,000

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