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3 - Cash Flow Statement - Indirect Method - Questions

This document provides a comparative balance sheet for RXC Corporation as of 2020 and 2019. It includes asset, liability and equity accounts with their balances for each year. Additional information is provided about the company's net loss, cash dividends paid, sale of land and equipment, retirement of bonds, and acquisition of

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1K views3 pages

3 - Cash Flow Statement - Indirect Method - Questions

This document provides a comparative balance sheet for RXC Corporation as of 2020 and 2019. It includes asset, liability and equity accounts with their balances for each year. Additional information is provided about the company's net loss, cash dividends paid, sale of land and equipment, retirement of bonds, and acquisition of

Uploaded by

mikheal beyber
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Statement of Cash Flow

Name: ___________________________________________ Score: ________

Section: ________________________________

Instruction: Answer the requirements after each problem.

Exercise 1
The comparative balance sheet for Fairmart Company appear below:

FAIRMART COMPANY
Comparative Balance Sheet

Dec. 31, 2021 Dec. 31, 2020


Assets
Cash P 28,000 P13,000
Accounts receivable 18,000 14,000
Prepaid expenses 7,000 9,000
Inventory 25,000 15,000
Long-term investments -0- 18,000
Equipment 60,000 30,000
Accumulated depreciation—equipment (18,000) (14,000)
Total assets P120,000 P85,000

Liabilities and Stockholders' Equity

Accounts payable P 25,000 P 7,000


Bonds payable 37,000 45,000
Common stock 40,000 23,000
Retained earnings 18,000 10,000
Total liabilities and stockholders' equity P120,000 P85,000

Additional information:
a. Net income for the year ending December 31, 2021, was P20,000.
b. Cash dividends of P12,000 were declared and paid during the year.
c. Long-term investments that had a book value of P18,000 were sold for P16,000.
d. Sales for 2021 are P120,000.

Required: Prepare a statement of cash flows (indirect method) for the year ended December 31, 2021.
Exercise 2
A comparative balance sheet for the RXC Corporation is presented below:

RXC Corporation
Comparative Balance Sheet

2020 2019
Assets
Cash P 40,000 P 31,000
Accounts receivable (net) 80,000 60,000
Prepaid insurance 22,000 17,000
Land 18,000 40,000
Equipment 70,000 60,000
Accumulated depreciation (20,000) (13,000)
Total Assets P210,000 P195,000

Liabilities and Stockholders' Equity


Accounts payable P 12,000 P 6,000
Bonds payable 27,000 19,000
Common stock 140,000 115,000
Retained earnings 31,000 55,000
Total liabilities and stockholders' equity P210,000 P195,000

Additional information:
1. Net loss for 2020 is P20,000. Net sales for 2020 are P250,000.
2. Cash dividends of P4,000 were declared and paid in 2020.
3. Land was sold for cash at a loss of P10,000. This was the only land transaction during the year.
4. Equipment with a cost of P15,000 and accumulated depreciation of P10,000 was sold for P5,000
cash.
5. P12,000 of bonds were retired during the year at carrying (book) value.
6. Equipment was acquired for common stock. The fair market value of the stock at the time of the
exchange was P25,000.
Required: Prepare a statement of cash flows (use indirect method) for the year ended 2020.
Exercise 3
The following are terms taken from the records of the Currency Company for 2017:
a. Profit after income tax expense of P780,000, P1,820,000
b. Payment for purchase of land, P400,000
c. Payment for the retirement of bonds, P600,000
d. Depreciation expense, P750,000
e. Proceeds from issuance of ordinary shares, P700,000
f. Share of profit of subsidiary, P480,000
g. Patent amortization expense, P270,000
h. Interest expense, P100,000
i. Increase in accounts receivable, P340,000
j. Payment of dividends, P500,000
k. Decrease in accounts payable, P26,000
l. Increase in interest payable, P18,000
m. Increase in income tax payable, P60,000

Required:
Prepare the operating activities section of the Currency Company’s 2017 Statement of Cash
Flows using the indirect method.

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