CFS Exercises

1. The ABC company uses indirect method to prepare its statement of cash flows.
The list of various activities performed by the company during the year 2014 is
given below:

1. Purchase of treasury stock

2. Purchase of available for sale investment
3. Sale of equipment at a loss
4. Increase in accounts payable
5. Decrease in accounts payable
6. Increase in inventory
7. Increase in accounts receivable
8. Purchase of land and building.
9. Decrease in accounts receivable.
10. Payment of dividends.
11. Sale of land at a gain.
12. Depreciation expense.
13. Sale of land at book value.

Required: Explain the effect of each activity on the statement of cash flows of the
ABC company for the year 2014.

2. The Meta company uses indirect method for preparing its statement of cash
flows. It reported a net income of $100,000 for the year 2016.

During the year 2016, the working capital accounts were changed as follows:

 Increase in accounts receivable: $22,000

 Increase in accounts payable: $18,600
 Increase in inventory: $14,800
 Decrease in non-trade notes payable: $30,000
 Increase in available for sale securities: $32,000

The depreciation expense was $34,000 for the year 2016.

Required: Compute net cash provided (used) by operating activities using indirect
method.
3. The following information have been taken from income statement and balance
sheet of PYMN Inc.

Income statement

 Net income: $192,500

 Depreciation expense: $62,500
 Amortization of intangible assets: $20,000
 Gain on sale of equipment: $45,000
 Loss on sale of investments: $17,500

Balance sheet:

 Accounts receivable on January 1, 2017: $190,000

 Accounts receivable on December 31, 2017: $167,500
 Inventory on January 1, 2017: $287,500
 Inventory on December 31, 2017: $251,500
 Prepaid expenses on January 1, 2017: $5,000
 Prepaid expenses on December 31, 2017: $11,000
 Accounts payable on January 1, 2017: $205,000
 Accounts payable on December 31, 2017: $189,500
 Accrued expenses payable on January 1, 2017: $77,500
 Accrued expenses payable on December 31, 2017: $90,000

Accounts payable given above relate to suppliers of merchandise.

Required: Using above information, compute net cash flows from operating
activities under indirect method.
During the year 2017, a dividend of $130 was declared and paid by management
of Edison Corporation. Some plant assets were purchased during 2017 and the
payment was settled by issuing common stock amounting to $35.
Required: Using the data given above, prepare statement of cash flows of Edison
Corporation using indirect method.