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The worksheet below presents the comparative statement of financial position items of NAMIBIA COMPANY at December 31, 2014 and 2013, with a column that shows the increase (decrease) from 2013 to 2014: Increase 2014 2013 (Decrease) Cash P4,037,500 P3,500,000 P537, Accounts receivable 5,640,000 5,840,...

Description

The worksheet below presents the comparative statement of financial position items of NAMIBIA COMPANY at December 31, 2014 and 2013, with a column that shows the increase (decrease) from 2013 to 2014: Increase 2014 2013 (Decrease) Cash P4,037,500 P3,500,000 P537,500 Accounts receivable 5,640,000 5,840,000 (200,000) Inventories 9,250,000 8,575,000 675,000 Property, plant & equipment 16,535,000 14,835,000 1,700,000 Accumulated depreciation (5,825,000) (5,200,000) (625,000) Investment in associate 1,525,000 1,375,000 150,000 Loan receivable 1,312,500 ------------1,312,500 Total assets P32,475,000 P28,925,000 P3,550,000

Accounts payable Income taxes payable Dividends payable Liability under finance lease Ordinary shares, P10 par Share premium Retained earnings Total liabilities and equity

P5,075,000 150,000 400,000 2,000,000 2,500,000 7,500,000 14,850,000 P32,475,000

P4,775,000 250,000 500,000 ---------2,500,000 7,500,000 13,400,000 P28,925,000

P300,000 (100,000) (100,000) 2,000,000 --------------------1,450,000 P3,550,000

Additional information: 1. On December 31, 2013, Namibia acquired 25% of Orly Co.’s ordinary shares for P1,375,000. On that date, the book value of Oriy’s assets and liabilities, which approximated their fair values, was P5,500,000. Orly reported income of P600,000 for the year ended December 31,2014. No dividend was paid on Orly’s ordinary shares during the year. 2. During 2014, Namibia loaned P1,500,000 to Ariel Co., an unrelated company. Ariel made the first semi-annual principal repayment of P187,500, plus interest at 10%, on December 31, 2014. 3. On January 2, 2014, Naminibia sold equipment costing P300,000, with a carrying amount of P175,000, for P200,000 cash. 4. On December 31, 2014, Namibia entered into a finance lease for an office building. The present value of the annual rental payments is P2,000,000, which equals the fair value of the building. Namibia made the first rental payment of P300,000 when due on January 2, 2015. 5. Net income for 2014 was P1,850,000 6. Namibia declared and paid cash dividends for 2014 and 2013 as follows:

Declared Dec. 15, 2013 Dec. 15, 2014

2013 2014

Paid Feb. 20, 2014 Feb. 20, 2015

Amount P500,000 P400,000

Based on the preceding information, determine the following: 1. Net cash provided by operating activities 2. Net cash used in investing activities 3. Net cash used in financing activities 1. CASH FLOWS FROM OPERATING ACTIVITIES Net income Depreciation Gain on sale of equipment Share of income – equity method Decrease in accounts receivable Increase in inventories Increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities

(1)

P1,850,000 750,000 (1) (25,000) (2) (150,000) (3) 200,000 (675,000) 300,000 (100,000) P2,150,000

Answer: B Net increase in accumulated depreciation Add: Accumulated depreciation On equipment sold: Cost P300,000 Carrying value (175,000) Depreciation for 2014

P625,000

125,500 P750,000

(2)

Proceeds from sale of equipment Carrying value Gain on sale of equipment

P200,000 175,000 P 25,000

(3)

Share of income – equity method (P600,000 x 25%)

P150,000

2. CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of equipment Loan to Ariel Co. Principal payment of loan receivable Net cash used in investing activities

P 200,000 (1,500,000) 187,500 P(1,112,500)

Answer: D

3. CASH FLOWS FROM FINANCING ACTIVITIES Net cash used in financing activities – dividends paid

P(500,000)

Answer: A PAS 7 provides that investing and financing transactions that do not require the use of cash or cash equivalents shall be excluded from a cash flow statement. Such transaction shall be disclosed elsewhere in the financial statements that provides all the relevant information about these investing and financing activities. The finance lease describe in the problem is an example of noncash transactions referred to in PAS 7.

Cash Flows from Operating, Investing & Financing Activities The schedule below shows the account balances of LESOTHO CO. at the beginning and end of the year ended December 31, 2014: DEBITS Cash and cash equivalents Investment in trading securities Accounts receivable Inventories Prepaid insurance Land and building Equipment Discount on bonds payable Treasury shares Cost of goods sold Selling and general expenses Income taxes Unrealized loss on trading securities Loss on sale of equipment Total debits

Dec. 31, 2014 P666,000 30,000 444,000 873,000 7,500 585,000 933,000 25,500 15,000 1,617,000 861,000 105,000 12,000 3,000 P6,177,000

CREDITS Allowance for bad debts P24,000 Accumulated depreciation – Building 78,750 Accumulated depreciation – Equipment 137,250 Accounts payable 165,000 Notes payable – current 210,000 Accrued expenses payable 54,000 Income taxes payable 105,000 Unearned revenue 3,000 Notes payable – noncurrent 120,000 Bonds payable 750,000 Deferred tax liability 141,000 Ordinary shares, P10 par 1,078,200 Retained earnings appropriated for Treasury shares 15,000 Retained earnings appropriated for Possible building expansion 114,000 Unappropriated retained earnings 103,800 Share premium 348,000 Sales 2,694,000 Gain on sale of trading securities 36,000 Total credits P6,177,000 Additional information: a) All purchases and sales were on account.

Dec.31, 2013 P150,000 120,000 300,000 900,000 6,000 585,000 510,000 27,000 30,000

__________ P2,628,000

P15,000 67,500 82,500 180,000 60,000 26,100 30,000 27,000 180,000 750,000 159,900 600,000 30,000 69,000 336,000 15,000 __________ P2,628,000

b) Equipment with an original cost of P45,000 was sold for P21,000. c) Selling and general expenses include the following: Building depreciation P11,250 Equipment depreciation 75,750 Bad debt expense 9,000 Interest expense 54,000 d) A six-month note payable for P150,000 was issued in connection with the purchase of new equipment. e) The noncurrent note payable requires the payment of P60,000 per year, plus interest until paid. f) Treasury shares were sold for P3,000 more than their cost. g) During the year, a 30% stock dividend was declared and issued. At that time, there were 60,000 of P10 par ordinary shares outstanding. However, 600 of these shares were held as treasury shares at that time and were prohibited from participating in the stock dividend. Market value of ordinary shares was P50 per share when the stock dividend was declared. h) Equipment was overhauled, extending its useful life, at a cost of P18,000. The cost was debited to Equipment. Based on the given data, calculate the following: 1. Net income for 2014 A. P135,000 B. P150,900

C. P130,500 D. P132,000

2. Cash dividends declared and paid during 2014 A. P24,000 C. P22,200 B. P156,000 D. P0 3. Proceeds from issuance of ordinary shares during the year A. P300,000 C. P630,000 B. P330,000 D. P808,200 4. Proceeds from sale of trading securities A. P78,000 C. P126,000 B. P114,000 D. P42,000 5. Accumulated depreciation of equipment sold A. P21,000 C. P24,000 B. P45,000 D. P27,000 6. Cash paid for purchase of equipment A. P150,000 C. P450,000 B. P318,000 D. P300,000

7. Proceeds from sale of treasury shares A. P18,000 C. P12,000 B. P15,000 D. P30,000 8. Net cash provided by operating activities A. P135,000 C. P249,000 B. P261,000 D. P267,900 9. Net cash used in investing activities A. P318,000 C. P183,000 B. P297,000 D. P279,000 10. Net cash provided by financing activities A. P564,000 C. P546,000 B. P561,000 D. P318,000...