4.

(CASH FLOW – OPERATING ACTIVITIES USING THE INDIRECT METHOD) Buntis Company’s net income last
year was P 98,000. Changes in the company’s balance sheet accounts for the year appear below:
Debit balances Increase (decrease) Credit balances Increase (decrease)
Cash P 24,000 Accumulated depreciation P 32,000
Accounts receivable 15,000 Accounts payable (14,000)
Inventory (18,000) Accrued liabilities 11,000
Prepaid expenses (6,000) Taxes payable (8,000)
Long-term investments 10,000 Bonds payable (40,000)
Plant and equipment 40,000 Deferred taxes 12,000
Common stock 10,000
Retained earnings 62,000
The company declared and paid cash dividends of P 36,000 last year.
Required: Construct in good form the following sections of the company’s statement of cash flow for the year:

 Operating activities section using the indirect method

 Investing activities section
 Financing section

Buntis Company
Statement of Cash Flow
For the Year Ended December 31, 2020

Cash flow from operating activities:

Net income ₱ 98,000
Increase in accounts receivable (15,000)
Decrease in inventory 18,000
Decrease in prepaid expenses 6,000
Depreciation expense 32,000
Decrease in accounts payable (14,000)
Increase in accrued liabilities 11,000
Decrease in taxes payable (8,000)
Increase in deferred taxes 12,000
Net cash provided by operating activities ₱ 140,000

Cash flow from investing activities:

Increase in long-term investments (10,000)
Increase in plant and equipment (40,000)
Net cash used for investing (50,000)

Cash flow from financing activities:

Decrease in bonds payable (40,000)
Increase in common stock 10,000
Cash dividends (36,000)
Net cash used in financing activities (66,000)
Cash, end ₱ 24,000

6. (CASH FLOWS FOR OPERATING ACTIVITIES USING THE DIRECT METHOD) Carney Company’s comparative
balance sheet and income statement for last year appear below:

Statement of Financial Position

Ending Beginning Ending Beginning

balance balance balance balance
Cash P 59,000 P 36,000 Accounts payable P 19,000 P 33,000
Accounts receivable 45,000 27,000 Accrued liabilities 37,000 20,000
Inventory 29,000 41,000 Taxes payable 4,000 13,000
Prepaid expenses 5,000 11,000 Bonds payable 90,000 130,000
Long-term investments 280,000 230,000 Deferred taxes 23,000 17,000
Plant and equipment 535,000 520,000 Common stock 130,000 100,000
Accumulated depreciation (297,000) (271,000) Retained earnings 353,000 281,000
Total assets P 656,000 P 594,000 Total liabilities and P 656,000 P 594,000
SHE

Income statement

Sales P 900,000
Cost of goods sold (500,000) P 400,000
Operating expenses (260,000)
Net operating income P 140,000
 Income taxes (42,000)
Net income P 98,000

The company declared and paid P 26,000 in cash dividends during the year.
Required: prepare in good form the operating activities section of the company’s statement of cash flows for the year using the
direct method.

Carney Company
Statement of Cash Flow
For the Year Ended December 31, 2020

Cash flow from operating activities

Cash received from customers P 882,000
Cash paid to suppliers (502,000)
Cash paid to operating expense (211,000)
Income tax paid (51,000)
Net cash provided by operating activities P 118,000

7. (STATEMENT OF CASH FLOW) Comparative financial statements for Passaic Company follow:

Passaic Company
Statement of Financial Position

As of December 31, Year 1 and Year 2

Assets Year 1 Year 2 Liabilities and SHE Year 1 Year 2

Current assets: Current liabilities
Cash P 18,000 P Accounts payable P 8,000 P 6,000
15,000
Accounts receivable 25,000 22,000 Accrued liabilities 15,000 6,400
Inventory 22,000 20,000 Total current liabilities P 23,000 P 12,400
Prepaid expenses 10,000 14,000 Bonds payable P 18,000 P 12,000
Total current assets P 75,000 P Deferred income taxes 15,000 4,000
71,000
Long term investments P 25,000 P 7,000 Total liabilities P 56,000 P 28,400
Plant and equipment P 80,000 P Stockholders’ equity:
77,000
Accumulated depreciation (64,000) (61,000) Common stock P 20,000 P 30,000
Plant and equipment (net) P 16,000 P Retained earnings 40,000 35,600
16,000
Total assets P 116,000 P Total stockholders’ equity P 60,000 P 65,600
94,000
Total liabilities and stockholders’ P 116,000 P 94,000
equity

Passaic Company
Statement of Financial Performance
For the Year ended December 31, Year 2

Sales P 70,000
Cost of goods sold (40,000)
Gross margin P 30,000
Operating expenses (including depreciation expense of P 5,000) (20,000)
Net operating income P 10,000
Non-operating income:
Loss on sale of investment (4,000)
Income before taxes P 6,000
Income taxes (2,400)
Net income P 3,600
Additional data on activities during Year 2 are as follows:
a) During Year 2, Passaic Company sold some equipment for P 3,000 that had cost P 15,000 and on which there was
accumulated depreciation of P 8,000.
b) Equipment was purchased for P 12,000 cash
c) Long-term investments that had cost P18,000 when purchased were sold for P 18,000
d) Common stock was issued for P 10,000
Required:
1) Determine the net cash provided by operating activities for year 2 using the:
a. Indirect method
b. Direct method
 2) Prepare the statement of cash flows

Passaic Company
Statement of Cash Flow
For the Year Ended December 31, 2020
Cash flow from operating activities
Net income 3,600
Decrease in accounts receivable 3,000
Decrease in inventory 2,000
Increase in prepaid expenses (4,000)
Decrease in accounts payable (2,000)
Decrease in accrued liabilities (8,600)
Decrease in deferred income taxes (11,000)
Loss on equipment 4,000
Depreciation expense 5,000
Cash used from operating activities (8,000)

Passaic Company
Statement of Cash Flow
For the Year Ended December 31, 2020
Cash flow from operating activities
Cash collections from customers 73,000
Cash payment to suppliers (40,000)
Cash payment to operating expenses (27,600)
Cash payment for income tax expenses (13,400)
Cash payment used from operating activities (8,000)

Cash flow from investing activities

Proceeds from selling long term investments 18,000
Proceeds from selling equipment 3,000
Payment in purchasing equipment (12,000)
Cash generated from investing activities 9,000

Cash flow from financing activities

Payment to bonds payable (6,000)
Proceeds from issuing common stock 10,000
Payment to dividend (8,000)
Cash used from financing activities (4,000)

Net change in cash flow (3,000)

Cash, Year 1 18,000
Cash, Year 2 15,000

8. (CASH FLOWS) Daschner Company’s comparative balance sheet and income statement for last year appear below:

Statement of financial position

Ending Beginning Ending Beginning

balance balance balance balance
Cash P 60,000 P 25,000 Accounts payable P 59,000 P 36,000
Accounts receivable 48,000 61,000 Accrued liabilities 42,000 24,000
Inventory 56,000 48,000 Taxes payable 7,000 14,000
Prepaid expenses 13,000 19,000 Bonds payable 80,000 140,000
Long-term investments 300,000 210,000 Deferred taxes 38,000 23,000
Plant and equipment 470,000 470,000 Common stock 110,000 70,000
Accumulated depreciation (222,000) (188,000) Retained earnings 389,000 338,000
Total assets P 725,000 P 645,000 Total liabilities and SHE P 725,000 P 645,000

Income statement

Sales P
540,000
Cost of goods sold (300,000 P 240,000
)
Operating expenses (150,000)
Net operating income P 90,000
Income taxes (27,000)
 Net income P 63,000

The company declared and paid P 12,000 in cash dividends during the year.
Required: Construct in good form the following sections of the company’s statement of cash flows for the year:
1) Operating activities using the:
a) Indirect method
b) Direct method
2) Investing activities
3) Financing activities
 Daschner Company
Statement of Cash Flow
For the Year Ended December 31, 2020

Cash flow from operating activities

Net income P 63,000
Decrease in accounts receivable 13,000
Increase in inventory (8,000)
Decrease in prepaid expense 6,000
Depreciation expense 34,000
Increase in accounts payable 23,000
Increase in accrued liabilities 18,000
Decrease in taxes payable (7,000)
Increase in deferred taxes 15,000
Cash flow provided by operating activities P 157,000

Daschner Company
Statement of Cash Flow
For the Year Ended December 31, 2020

Cash flow from operating activities

Cash received from customers P 553,000
Cash paid to suppliers (285,000)
Cash paid to operating expense (92,000)
Income tax paid (19,000)
Cash flow provided by operating activities 157,000

Cash flow from investing activities

Increase in long term investments (90,000)
Cash flow provided by investing activities (90,000)

Cash flow from financing activities

Decrease in bonds payable (60,000)
Increase in common stock 40,000
Cash dividends (12,000)
Cash flow provided by financing activities (32,000)
Net change in cash flow P 35,000
Cash, Year 1 25,000
Cash, Year 2 60,000