Intermediate accounting by robles empleoch 5 answers

Chapter 5 – The Cash Flow Statement
CHAPTER 5
THE CASH FLOW STATEMENT
PROBLEMS
5-1 (Wilson Company)
Cash flows from operating activities:
Net income before income tax 780,000 +1,820,000
Adjustments for:
Depreciation expense
Patent amortization expense
Income from investment in subsidiary
Interest expense
Operating income before working capital changes
Increase in accounts receivable
Decrease in accounts payable
Cash generated from operations
Interest paid
Income tax paid
Net cash from operating activities
5-2 (Bill Company)
Cash flows from operating activities:
Collections from customers
Payments to suppliers and employees
Cash generated from operations
Interest paid
Income taxes paid
Net cash from operating activities

P2,600,000
750,000
270,000

(480,000)
100,000
P3,240,000
(340,000)
( 26,000)
P2,874,000
(82,000)
(720,000)
P2,072,000

P983,000
(675,000)
P308,000
(82,000)
(154,000)
P 72,000

5-3 (Bean Company)
(a)
Indirect method
Cash flows from operating activities:
Net income before income tax
Adjustments for:
Depreciation expense
Operating income before working capital changes
Decrease in accounts receivable
Increase in inventories
Decrease in accounts payable
Increase in salaries payable
Cash generated from operations

Income tax paid (66,000 – 12,000)
Net cash from operating activities
(b)
Direct method
Cash flows from operating activities:
Collections from customers

P220,000
80,000
P300,000
50,000
(89,000)
(46,000)
24,000
P239,000
(54,000)
P185,000

P1,050,00
0
(715,000)
(96,000)
P 239,000
54,000
P185,000

Payments to trade creditors
Payments for salaries
Cash generated from operations
Income taxes paid

Net cash from operating activities
5- 4

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Chapter 5 – The Cash Flow Statement
Items that would be reported in the cash flow statement (indirect method)
1.
Depreciation expense of P120,000 is added to net income before income
taxes.
2.
Net gain of P5,000 from sale of machine is deducted from net income
before income taxes. (Gain of P9,000 from sale of machine A less loss of
P4,000 from sale of machine B).
3.
Under investing activities section, P29,000 is reported as a cash inflow
of sale of machine (27,000 from machine A plus P2,000 from machine
B).
4. Under investing activities, P250,000 is reported as a cash outflow for
purchase of machine.
5-5 Glad Company (Indirect method)
Glad Company
Cash Flow Statement
For year ended December 31, 2007
Cash flows from operating activities:
Net income
Adjustments for:
Depreciation expense
Operating income before working capital changes

Decrease in accounts receivable
Increase in inventory
Decrease in accounts payable
Net cash from operating activities
Cash flows from investing activities:
Purchase of equipment
Cash flows from financing activities:
Issue of common stock
P550,000
Cash dividends paid
(260,000)
Net increase in cash
Add cash balance, January 1
Cash balance, December 31

P580,000
290,000
P870,000
110,000
(200,000)
(90,000)
P690,000
(880,000)
290,000
P100,000
42,000
P142,000

5-6 (Alpha Company)
Alpha Company

Cash Flow Statement
For year ended December 31, 2007
Cash flows from operating activities:
Net income before income taxes
P2,955,000
Adjustments for:
Depreciation expense
750,000
Gain on sale of plant assets
(300,000)
Interest expense
100,000
Operating income before working capital
P3,505,000
changes
Increase in accounts receivable
(600,000)
Increase in prepaid rent
(6,000)
Decrease in accounts payable
(285,000)
Increase in salaries payable
120,000
Cash generated from operations
P2,734,000
Interest paid
( 80,000)
Income taxes paid
(400,000)
Net cash from operating activities

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P2,254,000


Chapter 5 – The Cash Flow Statement
Cash flows from investing activities:
Proceeds from sale of plant assets
Payments for purchase of plant assets
Payments for purchase of investment in
Omega
Cash flows from financing activities:
Receipts from issuance of common stock
Receipts from issuance of notes
Payments for dividends
Increase in cash
Add cash balance, beginning
Cash balance, end

P 800,000
(7,750,000)
(4,000,000)
P5,000,000
6,000,000
(1,200,000)

(10,950,000)

9,800,000

P1,104,000
430,000
P1,534,000

Direct method)
Alpha Company
Cash Flow Statement
For year ended December 31, 2007
Cash flows from operating activities:
Cash receipts from customers
P5,400,000
Cash payments for salaries
(1,980,000)
Cash payments for rent
(131,000)
Cash payments for miscellaneous
(555,000)
expenses
Cash generated from operations
P2,734,000
Interest paid
( 80,000)
Income taxes paid
(400,000)
Net cash from operating activities
Cash flows from investing activities:
Proceeds from sale of plant assets
P 800,000
Payments for purchase of plant assets
(7,750,000)

Payments for purchase of investment in
(4,000,000)
Omega

Cash flows from financing activities:
Receipts from issuance of common
stock
Receipts from issuance of notes
Payments for dividends
Increase in cash
Add Cash balance, beginning
Cash balance, end

(10,950,000)

P5,000,000
6,000,000
(1,200,000)

5-7 (Ace Company)
Ace Company
Cash Flow Statement
For year ended December 31, 2007
Cash flows from operating activities:
Net income
P 480,000
Adjustments for:
Depreciation expense
600,000
Loss on sale of equipment

80,000
Impairment loss on goodwill
100,000
Amortization of discount on bonds payable
50,000
Gain on sale of long-term investments
(30,000)
Increase in accounts receivable
(500,000)
Decrease in inventory
150,000

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P2,254,000

9,800,000
P1,104,000
430,000
P1,534,000


Chapter 5 – The Cash Flow Statement
Increase in accounts payable
Increase in trading securities
Net cash from operating activities
Cash flows from investing activities:
Sale of equipment
Purchase of property and equipment
Sale of long-term investment

Net cash flows from investing activities
Cash flows from financing activities:
Receipts from issuance of common stock
Payments for dividends
Net cash flows from financing activities
Increase in cash
Add cash balance, beginning
Cash balance, end

300,000
(100,000)

P 1,130,000

P420,000
(1,900,000)
280,000
(1,200,000)
P1,000,000
(750,000)

Purchase of equipment = 8,000,000 + 1,900,000 – 9,000,000 = 900,000
Depreciation expense = 2,200,000 + 400,0000 – 2,000,000 = 600,000

250,000
P 180,000
620,000
P 800,000

MULTIPLE CHOICE QUESTIONS

Theory
MC1
C
MC2
A
MC3
C
MC4
D
MC5
C
MC6
A
MC7
A
MC8
D
MC9
A
MC10
C
Problems
MC21
D
MC22
C
MC23
C
MC24
B

MC25
B
MC26
D
MC27
C
MC28
MC29
MC30
MC31
MC32

D
C
D
A
C

MC33
MC34
MC35
MC36
MC37
MC38
MC39
MC40

B
A
D

A
D
B
C
A

MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20

D
C
D
C
A
C
D
A
D
A

870,000 + 10,000 – 510,000 – 110,000 = 260,000
4,380,000 + 216,000 – 304,000 = 4,292,000

550,000 –500,000 + 125,000 = 175,000
250,000 + 550,000 – 600,000 – 450,000 = 250,000
200,000 + 500,000 – 250,000 = 450,000
750,000 – 29,000 + 21,000 + 15,000 = 757,000
260,000+40,000=300,000;
400,000–300,000=100,000;
100,000
+120,000-102,000 = 280,000
3,200,000 + 400,000 – 2,500,000 = 1,100,000
690,000-35,000-80,000+250,000+10,000+25,000+80,000 = 940,000
1,100,000 - 150,000 – 135,000 = 815,000
220,000 + 325,000 – 240,000 = 305,000
5,130,000
470,000
=430
,000;1,820,000+80,0001,700,000=200,000;
430,000–200,000=230,000+30,000 = 260,000
149,000+17,000-13,000=153,000; 840,000+53,000-32,000=861,000
910,000-40,000+70,000+50,000 = 990,000
990,000 – 60,000 – 50,000 – 90,000 + 30,000 = 820,000
30,000 – 5,000 = 25,000
281,600 + 25,000 = 306,600
3,600,000 + 2,500,000 – 1,550,000 – 2,910,000 = 1,640,000
240,000 – 120,000 + 280,000 = 400,000
3,000,000+960,000–400,000=3,560,000;1,000,000+300,000–280,000

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Chapter 5 – The Cash Flow Statement

MC41
MC42
MC43
MC44

B
C
B
A

MC45

D

=1,020,00; 3,560,000 – 1,020,000 = 2,540,000
380,000 + 160,000 = 540,000
1,200,000 + 1,000,000 – 300,000 = 1,900,000
8,000,000 – 7,200,000 + 150,000 + 20,000 + 18,000 = 988,000
Acc. Depreciation of equipment sold = 300,000 + 74,000 – 25,000 –
283,000 = 66,000
Cost of equipment sold = 66,000 + 100,000 = 166,000
Equipment purchased = 925,000 + 166,000 – 780,000 = 311,000
Dividends declared = 500,000 + 1,000,000 – 710,000 – 20,000 =
770,000
Dividends paid = 22,000 + 770,000 – 34,000 = 758,000

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