Cash flow from operating activities answer keys PDF

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Cash flow- Operating Practical Accounting (2018) 43-1: Seawell Company provided the following data for the preparation of the statement of cash flows for the current year: Dividends declared and paid Net cash used in investing activities Net cash used in financing activities

Cash Other assets Liabilities Share Capital Retained Earnings

800,000 (2,500,000) (800,000) December 31 2,100,000 21,000,000 10,500,000 2,000,000 10,600,000

January 1 1,200,000 22,700,000 11,700,000 2,000,000 10,200,000

What is the net cash provided by operating activities? a. 4,200,000 b. 2,400,000 c. 4,500,000 d. 5,400,000 Answer: A Solution: Cash- January 1

1,200,000

Net cash provided by operating activities (SQUEEZE)

4,200,000

Net cash used in investing activities

(2,500,000)

Net cash used in financing activities

(800,000)

Cash- December 31

2,100,000

43-2: Sun Company provided the following data for the preparation of the statement of cash flows for the current year: Increase in accounts payable Decrease in income tax payable Depreciation Net income Gain on sale of equipment Loss on sale of building

250,000 (300,000) (170,000) 1,000,000 (440,000) 210,000

What amount should be reported as net cash provided by operating activities? a. 780,000 b. 700,000 c. 880,000 d. 550,000 Answer: D Solution:

Net income

250,000

Increase in accounts payable

(300,000)

Decrease in income tax payable

(170,000)

Depreciation

1,000,000

Gain on sale of equipment

(440,000)

Loss on sale of building

210,000

Net cash provided by operating activities

550,000

43-3: Kersley company reported net income of P7,500,000 for the current year. The following account balances are provided for the preparation of the statement of cash flow for the year

Accounts receivable Allowance for doubtful accounts Prepaid rent expense Accounts payable

January 1

December 31

1,150,000 40,000 620,000 970,000

1,450,000 50,000 410,000 1,120,000

What is the net cash provided by operating activities? a. 7,270,000 b. 7,430,000 c. 7,550,000 d. 7,570,000 Answer: D Solution: Net income

7,500,000

Increase in net accounts receivable (1,400,000-1,110,000)

(290,000)

Decrease in prepaid rent expense

210,000

Increase in accounts payable

150,000

Net cash provided by operating activities

7,570,000 1-Jan

Accounts receivable Allowance for doubtful accounts Net accounts receivable

31-Dec

1,150,000

1,450,000

(40,000)

(50,000)

1,110,000

1,400,000

43-4: Brown company reported the following information for the current year: Sales Cost of goods sold Distribution cost Administrative expense Depreciation expense Interest expense Income tax expense

2,800,000 1,000,000 400,000 350,000 250,000 80,000 280,000

All sales were made cash for cash and all expenses other than depreciation and bond premium amortization of 20,000 were paid in cash All current assets and current liabilities remained unchanged What is the net cash provided by operating activities for the current year? a. 440,000 b. 690,000 c. 670,000 d. 710,000 Answer: C Solution: Sales

2,800,000

Cost of goods sold

(1,000,000)

Distribution cost

(400,000)

Administrative expense

(350,000)

Interest paid

(100,000)

Income tax expense

(280,000)

Net cash provided by operating activities

670,000

Interest expense

80,000

Premium amortization

20,000

Interest paid

100,000

43-5: Mahogany company had the following account balances for the current year: Accounts payable

December 31 500,000

January 1 700,000

Inventory Accounts receivable

300,000 800,000

450,000 750,000

All purchases of inventory were on account. The entity provided the following income statement information for the current year: Revenue Cost of goods sold Other expenses Depreciation expense Loss on sale of equipment Net income

9,800,000 (4,000,000) (1,300,000) (1,000,000) (100,000) 3,400,000

What is the net cash provided by operating activies? a. 4,500,000 b. 4,400,000 c. 4,600,000 d. 4,300,000 Answer: B Solution: Net income

3,400,000

Depreciation

1,000,000

Loss on sale of equipment

100,000

Decrease in accounts payable

(200,000)

Decrease in inventory

150,000

Increase in accounts receivable

(50,000)

Net cash provided by operating activities

4,400,000

43-6: Champaca Company provided the following information for the current year: Net income for the current year Sales revenue Cost of goods sold, except depreciation Depreciation expense Amortization of intangible assets Interest expense on bank note payable Dividends paid during the year Accounts receivable Inventory Accounts payable Interest payable Note payable - bank

750,000 4,500,000 2,750,000 500,000 200,000 300,000 350,000 January 1 220,000 350,000 475,000 100,000 2,500,000

December 31 150,000 400,000 520,000 85,000 3,000,000

Under the indirect method, what amount should be reported as net cash provided by operating activities? a.1,500,000 b.1,515,000 c.1,450,000 d.2,020,000 Answer: D Solution: Net income Depreciation Amortization Decrease in account receivable Increase in inventory Increase in accounts payable Decrease in interest payable Net cash flow from operating activities

700,000 500,000 200,000 70,000 (50,000) 45,000 (15,000) 1,500,000

43-7: Metro Company reported net income of P7,500,000 for the current year. Changes in certain accounts during the year are: Investment in Videogold stock carried on the equity basis Accumulated depreciation, caused by major repair on project equipment Unearned interest income Premium on bonds payable Deferred tax liability What is the net cash provided by operating activities? a. 7,490,000 b. 7,220,000 c. 6,940,000 d. 7,040,000 Answer: C Solution: Net income

7,500,000

Increase in investment carried at equity, representing shares in net income of investee

(550,000)

Decrease in unearned interest income

(140,000)

Amortization of premium on bonds payable

180,000

(50,000)

550,000 increase 210,000 decrease 50,000 decrease 140,000 decrease 180,000 increase

Increase in deffered tax liability

6,940,000

43-8: Albay Company provided the following information for the current year: Accounts receivable, January 1, net of allowance of 100,000 Accounts receivable, December 31, net of allowance of 300,000 Sales of the year – all on credit Uncollectible accounts written off during the year Bad debts expense for the year Cash expenses for the year Net income for the year What is the net cash provided by operating activities? a. 2,100,000 b. 2,350,000 c. 2,900,000 d. 2,150,000 Answer: A Solution:

Indirect method : Net income

2,500,000

Inc. in accounts receivable (1600000-1200000)

(400,000)

Net cash provided by operating activities

2,100,000

Direct method: A/R Jan 1 (1200000+100000)

1,300,000

Sales

8,000,000

Total

9,300,000

A/R Dec 31 (1600000+300000)

(1,900,000)

Accounts written off

(50,000)

Collection from customers

7,350,000

Cash expenses

(5,250,000)

Net cash provided by operating activities

2,100,000

1,200,000 1,600,000 8,000,000 50,000 250,000 5,250,000 2,500,000

43-9: Lance Company provided the following data for the current year: Sales Cost of goods sold Expenses paid Depreciation Net income Increase in accounts receivable Decrease in inventory Decrease in accounts payable 1. What amount of cash was received from the customers? a. 8,000,000 b. 7,000,000 c. 6,500,000 d. 5,500,000 Answer: B Solution:

Sales

7,500,000

Increase in A/R

(500,000)

Cash received from customers

7,000,000

2. What amount of cash was paid to the suppliers? a. 3,000,000 b. 2,400,000 c. 4,000,000 d. 3,600,000 Answer: D Solution:

Purchase s Decrease in inventory

3,000,000 1,000,000

COGS

4,000,000

Purchase s

3,000,000

Decrease in A/P

600,000

Payment to suppliers

3,600,000

3. What is the net cash provided by operating activities? a. 2,000,000 b. 2,400,000

7,500,000 (4,000,000) (1,100,000) ( 400,000) 2,000,000 500,000 1,000,000 600,000

c. 2,300,000 d. 1,700,000 Answer: C Solution: Direct method: Cash received from costumers Payments to suppliers

7,000,000

Expenses paid

(1,100,000)

Net cash provided by operating activities

2,300,000

(3,600,000)

Indirect method: Net income

2,000,000

Depreciation

4,000,000

Increase in A/R Decrease in inventory

(500,000)

Decrease in A/P

(600,000)

Net cash provided by operating activities

2,300,000

1,000,000

43-10 Mazda Company reported the following information: Income tax payable Deferred tax liability Income tax expense What amount of income tax was paid in 2018? a. 2,420,000 b. 1,930,000 c. 1,650,000 d. 1,580,000 Answer: D Solution:

2018 1,750,000 210,000 2,000,000

Income tax expense for 2018

2,000,000

Income tax payable - 2017

1,400,000

Income tax payable - 2018

(1,750,000)

2017 1,400,000 140,000

Deferred tax liability - 2017

140,000

Deferred tax liability - 2018

(210,000)

Cash paid for income tax in 2018 1,580,000 43-11: Claire Company reported the following data in relation to interest expense: 2017

2018

Interest expense

1,200,000

1,500,000

Accrued interest payable

700,000

600,000

Interest costs related to construction in progress are capitalized as incurred. The entity capitalized P300,000 and P250,000 of interest costs during 2018 and 2017, respectively.

What total amount of interest was paid in 2018 including the amount capitalized in progress? a. 1,600,000 b. 1,400,000 c. 1,300,000 d. 1,900,000 Answer: D Solution: Interest expense in 2018 included in profit or loss Accrued interest payable – December 31, 2017 Accrued interest payable – December 31, 2018 Interest paid in 2018 included in profit or loss Interest paid in 2018 included in profit or loss Interest paid in 2018 and capitalized Total interest paid in 2018

1,500,000 700,000 (600,000) 1,600,000

1,600,000 700,000 1,900,000

43-12: Zeus company reported provided the following information for the current year:

Net income Amortization of patent

5,000,000 45,000

Depreciation of property,plant and equipment

1,650,000

Long Term debt: Bond discount amortization Interest paid Unrealized loss on financial asset held for trading

65,000 900,000 100,000

Unrealized loss on financial asset at fair value through other comprehensive income

400,000

What is the net cash provided by operating activities in the statement of cash flows for the current year?

a. 6,760,000 b. 6,630,000 c. 6,730,000 d. 6,860,000 Answer: D Solution: Net income Amortization of patent Depreciation

5,000,000 45,000 1,650,000

Discount amortization

65,000

Unrealized loss on financial asset held for trading

100,000

Net cash provided by operating activities

6,860,000

43-13: Blacktown Company had the following account balances for the current year: December 31 Accounts payable 500,000 Inventory 300,000 Accounts receivable 800,000 Prepaid expenses 400,000  All purchases of inventory were on account  Depreciation during the year was P900,000  Equipment was sold during the year at a gain of P300,000 The entity provided the following cash flows from the current year: Cash collected from costumers 9,500,000 Cash paid for inventory (4,100,000) Cash paid for other expenses (1,400,000) Cash flow from operations 4,000,000

January 1 650,000 250,000 900,000 600,000

What is the net income for the current year? a. 3,300,000 b. 3,400,000 c. 3,000,000 d. 3,900,000 Answer: A Solution: Net income (SQUUEEZE)

3,300,000

Decrease in A/P

(150,000)

Increase in inventory

(50,000)

Decrease in A/R

100,000

Decrease on prepaid expenses

200,000

Depreciation

900,000

Gain on sale of equipment

(300,000)

Cash flow from operations

4,000,000...