1

CONCEPTUAL FRAMEWORKS AND ACCOUNTING STANDARDS

CASH FLOWS- OPERATING-INVESTING
(THEORIES)

PROF. U.C. VALLADOLID

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

1. Declaration and payment of dividends

a. cause stockholders' equity and cash to decrease
b. cause stockholders' equity and cash to increase
c. are shown in operating activity
d. are current liabilities

2. The following are examples of investing activities presented in the statement of cash flows except
a. Cash receipts from repayments of advances and loans made to other parties.
b. Cash receipts from sale of equity or debt instruments of other entities.
c. Cash receipts and payments for securities held for trading.
d. Cash advances and loans to other parties other than advances and loans made by financial institutions.

3. Income taxes payable is

a. A non-current liability account.
b. Shown in the operating activities section of the statement of cash flows
c. Treated as an increase in financing activity
d. Treated as decrease in investing activity

4. The amortization of an intangible asset

a. is added back to net income in the operating activities section
b. is deducted to net income in the operating activities section
c. is added back to the investing activities section
d. is deducted to the investing activities section

5. Operating activities are

a. The acquisition and disposal of long-term assets and other investments not included in cash equivalents
b. The principal revenue-producing activities of the entity that generally result from the transactions and other
events that enter into the determination of profit or loss
c. The activities that result that changes in size and composition of equity capital and borrowings of the entity
d. Cash flows arising from purchase and sale of goods in the ordinary course of business only
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6. The exchange/conversion of long-term bonds into common stock

a. Is a non-cash exchange and appears as supplemental information.
b. Is a non-cash exchange and appears in financing activity.
c. Is a non-current asset which appears in operating activity.
d. Is a non-current liability which appears in financing activity.

7. Which of these is an advantage of the direct method?

a. It's easy to follow the money.
b. Hiring assistance for direct method is cheap.
c. It's really easy to prepare.
d. There is no accounting for non-cash assets.

8. Which of the following is an investing activity?

a Cash receipts from sale of goods and rendering of services
b. Cash receipts from royalties, fee, commissions, and other revenues
c. Cash receipts and payments from futures contracts held for trading or dealing purposes
d. Cash advances and loans made to other parties, other than advances and loans made by financial institution

9. Which of the following is considered as an operating activity?

a. Cash proceeds from issuing shares and other equity instruments
b. Cash payments to owners to acquire or redeem the entity’s shares
c. Cash receipts and payments of an insurance entity for premiums, claims, annuities and other policy benefits
d. Cash proceeds from issuing debentures, loans, notes, bonds, mortgages, and other short-term or long-term borrowings

10. Cash advances and loans made by financial institutions are classified as
a. Investing activities
b. Operating activities
c. Financing activities
d. Lending activities

11. Cash flows arising from income taxes should be separately disclosed and should be included in
a. Operating activities
b. Investing activities
c. Financing activities
d. Lending activities

12. Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method
in:
a) The cash flows from financing activities section
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b) The cash flows from investing activities section

c) The cash flows from operating activities section
d) A separate schedule

13. Which of the following would be classified as an operating activity?

a) Payment of a cash dividend
b) Sale of equipment
c) Making a loan to another entity
d) Payment of interest

14. Which of the following is not an operating activity?

a) Payment of taxes
b) Dividends received
c) Payment of a cash dividend
d) Payment to suppliers

15. The indirect method of preparing the statement of cash flows begins with
a) Collections from customers
b) Cash sales
c) Net income
d) Beginning Cash Balance

16. Under IFRS, an entity can report finance costs in the statement of cash flows

a. in operating activities.
b. either in the operating activities or financing activities.
c. in financing activities.
d. in investing activities or financing activities.

17. The change in accumulated depreciation on factory equipment would be reported in the statement of cash flows
prepared by the indirect method in:
a) The cash flows from financing activities section
b) The cash flows from investing activities section
c) The cash flows from operating activities section
d) Not reported as it is not a cash flow

18. The loss on the sale of equipment is

a. Included in investing activity
b. Treated as a decrease in the operating activity
c. Added back to the operating activity because it is treated as an expense
d. Added back to operating activity because it has been reduced on the income statement but there’s no
decrease in cash
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19. Cash flows arising from trading securities are

a. Classified as operating activity.
b. Classified as investing activity.
c. Classified as financing activity
d. Not reported in the cash flow statement.

20. Cash receipts from royalties and commissions are

a. Cash outflows for operating activities.
b. Cash inflows from operating activities.
c. Cash inflows from investing activities.
d. Cash outflows for financing activities.

21. Below are the examples of cash flows from operating activities except:
a. Cash payment to settle trade accounts and notes payable
b. Cash receipts from issuing loans, notes and bonds
c. Cash receipts and payments for securities held for trading
d. Cash receipts from royalties, rental fees, commissions and other revenue

22. Cash payments to settle such obligations as trade accounts and notes payable are
a. Cash outflow for financing activities.
b. Cash outflow for investing activities
c. Cash outflow for operating activities.
d. Cash inflow from financing activities.

23. Statement 1: Cash advances and loans made by a financial institution are classified as financing activities.
Statement 2: Unearned loss from holding equity securities are reported as cash outflow to financing activities.
a. Both statements are correct.
b. Only statement 1 is correct.
c. Only statement 2 is correct.
d. Both statements are incorrect.

24. Acquiring non-operating assets of an entity is a

a. cash inflow for investing activities
b. cash inflow for operating activities
c. cash outflow for operating activities
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d. cash outflow for investing activities

25. An example of a cash flow from an operating activity is:

A. receipt of cash from the sale of stock

B. receipt of cash from the sale of bonds
C. payment of cash for dividends
D. receipt of cash from customers on account

26. An example of a cash flow from an investing activity is:

A. receipt of cash from the sale of equipment

B. receipt of cash from the sale of stock
C. payment of cash for dividends
D. payment of cash to acquire treasury stock

27. Which of the following methods of reporting cash flows from operating activities adjusts net income for revenues and
expenses not involving the receipt or payment of cash?

A. Direct method
B. Purchase method
C. Reciprocal method
D. Indirect method

28. Name five common major classes of operating cash receipts or operating cash payments presented on
the statement of cash flows when the cash flows from operating activities are reported by the direct method.

A. Cash received from customers, cash payments for merchandise, cash payments for operating
expenses, cash payments for interest, cash payments for income taxes.
B. Depreciation, amortization, cash received from customers, cash payment for income taxes and cash payment for
interest
C. Both A and B
D. No answer

29. It contains the cash flows derived primarily from the principal revenue producing activities of the entity which arises
from the purchase and sale of dealing or trading securities.
a. Investing activities
b. Financing activities
c. Statement of Cash Flows
d. Operating activities

30. On the other hand, the cash flow is considered under the Investing activities when
a. It is derived from the equity capital and borrowings of the entity
b. It is derived from the acquisition and disposal of long term assets
c. It results from transactions that enter into the determination of income or loss
d. It settles such obligations as trade accounts and notes payable, income tax payable or accrued expenses.

31. It reports the inflows and outflows of cash during the period.
a. Statement of Financial Position
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b. Statement of Comprehensive Income

c. Statement of Cash Flows
d. Statement of Changes in Owner’s Equity

32. Investing activities includes cash flows from transactions involving nonoperating assets. For example:
a. Cash receipts from sales of equity or debt instruments of other entities
b. Cash payments to acquire treasury shares
c. Cash payments for amounts borrowed
d. Cash receipts from issuance of ordinary shares

33. All of these are major advantages of the indirect method of reporting cash flows from operating activities, except
A. It focuses on the differences between net income and cash flows from operating activities
B. The data needed are generally more readily available
C. Less costly to obtain than is the case for the direct method
D. More specific compare to direct method

34. Statement A: Equity Securities don’t have maturity date so they qualify as cash and cash equivalents

Statement B: Preference Shares with specified redemption date and is acquired 3 months before the redemption date
can be qualified as a cash equivalent

Which of the following statement is correct?

a. Statement B only

b. Statement A only

c. Both statements A& B

d. Neither A& B

35. Cash flows from operating activities are the following except:

a. Cash receipts and payments from insurance enterprise

b. Cash payments from suppliers

c. Cash receipts from sale of equity instruments

d. Cash receipts and payments for securities held for dealing and trading purposes

36. Statement A: Cash flows that arise from the sale of trading securities are classified as investing activities

Statement B: Cash flows and advances made by a financial institution are usually identified as a financing activity

Which of the following statement is correct?

a. Statement B only
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b. Statement A only

c. Both statements A& B

d. Neither A or B

37. Investing activities are

a. cash flows involving operating assets

b. cash flows from investments included in cash equivalent

c. cash flows from the sale and disposal of long term assets

d. cash flows from principal revenue producing activities

38. Dividend received and interest received may be classified alternatively as cash flow from
a. financing activities. c. investing activities.
b. revenue activities. d. operating activities.

39. Under IFRS, the dividend received from share investments can be classified as
a. only as investing activity.
b. only as operating activity.
c. either an operating activity or financing activity.
d. either an operating activity or investing activity.

40. Cash flows arising from trading securities are

a. classified as operating activities.
b. classified as investing activities.
c. classified as financing activities.
d. not reported in the statement of cash flows.

41. Cash loans and advances from bank overdraft should be reported in the statement of cash flows as
a. financing activities. c. investing activities.
b. operating activities. d. other significant noncash activities.

42. Operating activities are the cash flows derived primarily from the principal revenue producing activities of the entity.
These are all transactions of operating activities except
a. Cash payments to suppliers for goods and services
b. Cash receipts from royalties, rental, fees, commissions and other revenue
c. Cash receipts from sales of equity or debt instruments of other entities
d. Cash payments for selling, administrative and other expenses

43. Cash flows arising from the purchase and sale of dealing or trading securities are classified as
 8

a. financing activities
b. operating activities
c. investing activities
d. none of the above

44. Generally result from transactions and other events that enter into the determination of net income or loss.
a. financing activities
b. operating activities
c. investing activities
d. income and loss activities

45. Investing activities are the cash flows derived from the acquisition and disposal of long-term assets including cash
equivalent and investments. These are all transaction of investing activities except
a. Cash payments to acquire treasury shares
b. Cash receipts from sales of equity or debt instruments of other entities
c. Cash receipts from repayment of advances and loans made to other parties
d. Cash payments to acquire equity or debt instruments of other entities

46. What section of the cash flow statement would list where payments went?
a. Nowhere on the statement
b. Investment Section
c. Financial Section
d. Operating Section

47. What is a cash flow statement?

a. A document detailing a CEO's yearly expenses
b. A process using both documentation and business assets to assess its worth
c. A document detailing how money flows through a business
d. Using existing documents to cover up fraud

48. Which of these sections of the cash flow statement is affected by the direct method?
 9

a. Financing
b. Operations
c. All sections are affected
d. Investments

49. A cash flow statement is a:

a. Document listing the board of directors of a company.
b. Document showing how money moves through an organization.
c. Document showing what money goes out but not in.
d. Document listing the incorporation of a company
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CONCEPTUAL FRAMEWORKS AND ACCOUNTING STANDARDS

CASH FLOWS- OPERATING-INVESTING
(PROBLEMS)
PROF. U.C. VALLADOLID

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

1. A corporation reported the following information for the past year:

Net Income …………………………………………………………….. 200,000

Depreciation Expense ………………………………………………..… 30,000

Gain on sale of Truck ……………………………………………………. 5,000

Proceeds from sale of truck …………………………………………….. 8,000

Decrease in accounts receivable …………………………………….. 10,000

What amount will the corporation report as the cash provided by Operating Activities on the cash flow statement?

a. 225,000 c. 253,000

b. 235,000 d. 252,000

2. Selton Co. reports the following for the year ended December 31,2022

2021 2022
Cash 22,000 44,000
Accounts Receivable 28,000 26,000
Inventories - 60,000
Prepaid Expenses 6,200 4,200
Land 30,000 10,000
Buildings 150,000 150,000
Accumulated Depreciation-Building (20,000) (40,000)
Equipment 89,000 101,000
Accumulated Depreciation-Equipment (12,000) (20,000)
Accounts Payable 30,000 33,000
Bonds Payable 140,000 100,000
Common Stock (P1) 100,000 170,000
Retained Earnings 23,200 32,200

Additional Information:

1. Net income of 57,000 for the year ended December 31,2022

2. Land was sold for its book value at cash.
3. A cash dividend of 48,000 was paid in 2022.
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4. An interest expense of 8,000 was paid in cash.

5. Equipment for 36,000 was purchased for cash and equipment with a cost of 24,000 and a book value of 18,000
was sold for 16,000.

1. What is the net cash provided/(used) in operating activities?

a 40,000
b 80,000
c 17,000
d 44,000

3. Soriano Corporation reported net income of 60,000. Indicated there was a Depreciation expense of 19,000 and the
following working capital accounts changed:

Accounts Receivable ………………………………… increased by 11,000

Non-trading equity investment ……………………… increased by 16,000

Non-trade notes payable …………………………….. increased by 15,000

Inventory ……………………………………….……….. increased by 7,300

Proceeds from sale of equipment ……………………………..……… 3,500

If Soriano Company uses IFRS reporting and the indirect method, what amount is their adjustments to reconcile net
income to net cash provided by or used in operating activities?

a. (18,300) c. 14,800

b. 18,300 d. (14,800)

4. Makiling Company had a net income of 20,000 and had the following adjustments

Decrease in Accounts Receivable ………………………… 10,000

Increase in Inventories ………………………………………… 2,000

Decrease in Accounts Payable ……………………………… 25,000

Loss on sale of equipment …………………………………… 12,000

How much is the net cash provided in the investing activity?

a. (5,000) c. none

b. 5,000 d. 12,000
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5. The ABC Company provided the following data in preparation for the Statement of Cash Flows:

Dividends declared 900,000

Net cash used in investing activities (3,500,000)

Net cash used in financing activities ( 900,000)

December 31 January 1

Cash 3,100,000 2,200,000

Other Assets 22,000,000 23,700,000

Liabilities 11,500,000 12,700,000

Share capital 3,000,000 3,000,000

Retained Earnings 11,600,000 11,200,000

What is the net cash provided by operating activities?

a. 5,300,000
b. 3,400,000
c. 5,600,000
d. 6,400,000

6. Net cash flow from operating activities is 550,000, The following items are reported on the financial statements for
2019:
Patents 46,000
Increase in Prepaid Rent 4,000
Depreciation and Amortization 12,500
Cash dividends paid on ordinary 25,000
Decrease in Accounts Receivables 33,000

Sofia’s net income for 2019 was?

a. 591,500 c. 545,500
b. 508,500 d. 554,500

7. The following information have been taken from income statement and balance sheet of Rio Inc.

Income statement
 Net income: $192,500
 Depreciation expense: $62,500
 Amortization of intangible assets: $20,000
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 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.

Using above information, what is the net cash flows from operating activities under indirect method?

a. 36, 000

b. 104,500

c. 192, 500

d. 297,000

8. Lopez Corporation had the following equity transactions at December 31:

Cash proceeds from sale of investment

in Garry Corporation (Carrying Value-60,000) ……………………………… 75,000

Dividends received on Blue Corporation stock …………………………….. 10,500

Common stock purchased from Ding Dong Corp. ………………………… 38,000

What amount should Lopez recognize as net cash from investing activities in its statement of cash flows at December 31?

a. 15,000 c. 123,500

b. 75,000 d. 48,500

9. The Moo Company gave the following data for the preparation of the Statement of Cash Flows:

Increase in accounts receivable 200,000

Decrease in income tax payable 70,000

Net Income 150,000

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Depreciation 900,000

Loss on sale of equipment 110,000

Gain on sale of building 340,000

Using the indirect method, what amount should be reported as net cash provided by operating activities?

a. 680,000
b. 670,000

c. 600,000

d. 550,000

10. Moon Company had a net income of ₱ 6,500,000 for the year. The following balances are provided for the
preparation of the statement of cash flows for the year:

January 1 December 31

Accounts Receivable 2,150,000 2,450,000

Allowance for Doubtful Accounts 50,000 60,000

Prepaid Rent Expense 720,000 510,000

Accounts Payable 870,000 1,020,000

What is the cash provided by operating activities?

a. 6,270,000

b. 6,430,000

c. 6,570,000

11. The following activities occurred during the current year of Clark Company.

Acquisition of 3,000 shares of Carmi Company for Php 3,700,000.

Sold an investment in Joe Company for Php 4,600,000 when the carrying value was Php 4,400,000.
 15

Acquisition of Php 6,000,000, 5-year certificate of deposit from a bank. During the year, interest of Php 485,000 was paid
to Clark Company.

Collection of dividends of Php 120,000 on share investments.

What amount should be reported as net cash used in investing activities?

a. 4,825,000

b. 4,905,000

c. 5,100,000

d. 5,000,000

12. The following information is provided by Boo Company:

Purchase of inventory 1,950,000

Purchase of land (with vendor financing of Php 2,000,000 for 2 years) 4,500,000

Purchase of plant 3,500,000

Sale of plant 500,000

Ordinary shares(buyback) 800,000

What amount should be reported as investing net cash outflow?

a. 5,500,000

b. 5,600,000

c. 6,550,000

d. 4,300,000

13. The following information was taken from the financial records of the Bobby Company.

End of Year Beginning of Year

Cash P 23,500 P37,400
Accounts receivable (net) 84,500 80,350
Inventories 100,200 94,300
Prepaid expenses 4,970 5,300
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Accounts payable (creditors) 71,400 68,900

Salaries Payable 5,320 6,450

Net Income reported on the income statement for the current year was P134,800. Depreciation expense recorded on
buildings and equipment was P27,400 for the year.

Using the indirect method, the Cash Flows from Operating Activities section of the Statement of Cash Flows is

A. P158, 350
B. P153, 850
C. P275, 350
D. P237, 850

14. The following information was taken from the financial records of the Abbi Company.

a) Net income was P189,500 for the period.

b) Purchased 10,000 shares of common stock at P15 per share for the treasury.
c) Sold equipment with a carrying value of P32,500 at a gain of P6,000.
d) Purchased land and a building worth P450,000 by signing a ten-year note.
e) Issued P1,000,000 in bonds at par.
f) The beginning and ending retained earnings account balances were P418,000 and
P534,000, respectively. There were no prior period adjustments.
g) Wrote a check for P648,000 for the purchase of machinery.
h) Sold long-term investments in stocks with a cost ofP50,000 at a loss of P17,500.
i) Cash dividends were declared and paid during the period.

Net cash flows from investing activities is:

A. P677,000
B. P687,000
C. P987,000
D. P577,000

15. If a loss of P15,000 is incurred in selling (for cash) office equipment having a book value of P50,000 the total amount
reported in the cash flows from investing activities section of the statement of cash flows is:

A. P22,000 C. P78,000

B. P35,000 D. P15,000

16. The Dahan Corporation was organized on January 15, 2018 and started operation soon thereafter. The company
cashier who acted as the bookkeeper had kept the accounting records unresponsibly. The manager suspects him of
defalcation and engaged you to audit his account to find out the extent of the fraud, if there is any.
On November 15 when you started the examination of the accounts, you find the cash on hand to be 25,700. From
inquiry at the bank, it was ascertained that the balance of the company's bank deposit in current account on the same
 17

date was 131,640. Verification revealed that the check issued for 9,260 is not yet paid by the bank. The corporation sells
at 40% above cost.
Your examination of the available records disclosed the following information:
Capital stock issued at par for cash 1,600,000
Real state purchased and paid in full 1,000,000
Mortgage liability secured by real state 400,000
Furniture and fixtures (gross) on which
there is still balance unpaid of 30,000 145,000
Oustanding notes due to bank 160,000
Total amount owed to creditors on open account 231,420
Total sales 1,615,040
Total amount still due from customers 426,900
Inventory of merchandise on November 15 at cost 469,600
Expenses paid including purchases 303,780
Based on the above and the results of your audit, compute for the following as of November 15, 2018:
1. Collections from sales
a. 2,041,940 c. 1,615,040
b. 1,188,140 d. 1,153,600
2. Payments from purchases
a. 922,180 c. 1,207,204
b. 1,391,780 d. 1,854, 620
3. Total cash disbursements
a. 2,340,960 c. 3,273,400
b. 2,810,560 d. 2,625,984
4. Unadjusted cash balance
a. 74,740 c. 537, 580
b. 722,156 d. 1,007,180
5. Cash shortage
a. 0 c. 859,100
b. 574,076 d. 389,500
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17. A piece of equipment was sold for P3,000. The original cost was P15,000 and the accumulated depreciation was
P10,000. Using the indirect method, what amount, if any, would appear in the operating activities section?

A. P0
B. P2,000
C. P3,000
D. P15,000

18. Year 2019, Alejandro Company reported a net loss of 75,000. The company’s only net income adjustments were
depreciation expense of 81,000 and increase in accounts receivable 8,100. What is the company’s net cash provided by
operating activities?

a. 2900 c. 19,100

b. (2,900) d. (19,100)

19. Land costing P78,000 was sold for P100,000 cash. The gain on the sale was reported on the income statement as
other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of
the land?

a) P22,000 c) P100,000

b) P78,000 d) P178,000

20. Moon company provided the following data for the preparation of statement of cash flows for the year ended
December 31, 2023:
Cash balance, beginning 1,500,000
Cash paid to purchase inventory 7,800,000
Cash received from sale of trading securities 2,500,000
Cash paid for interest on bank loan 450,000
Cash paid to repay the principal amount of bank loans 1,000,000
Cash collected from customers 10,000,000
Cash received from issuance of ordinary shares 1,200,000
Cash paid for dividends 2,000,000
Cash paid for income tax 1,350,000
Cash paid to purchase trading securities 1,000,000

1. What is the net cash provided by operating activities?

a. 1,900,000
b. 2,900,000
c. 2,350,000
d. 400,000
2. What is net cash used in financing activities?
a 3,000,000
b 2,000,000
c 1,800,000
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d 4,200,000

3. What is the cash balance to be reported at the year end?

a 3,400,000
b 1,600,000
c 1,400,000
d 2,400,000

21. An equipment which costs 860,000 with an accumulated depreciation of 235,000 was sold for 570,000. This
transaction will appear on their Statement of Cash Flows (Indirect Method) as:
a. Deduction on net income 55,000 and a 570,000 cash inflow from investing activities
b. Addition to net income 55,000 and a 570,000 cash inflow from investing activities
c. Deduction on net income 290,000 and a 570,000 cash inflow from investing activities
d. Addition on net income 290,000 and a 570,000 cash inflow from investing activities

22. Beta Company had net cash provided by operating activities of 2,950,000 for 2022. The following were also reported
by Beta Company in 2022:

Loss from sale of equipment 200,000

Salary Expense 10,000
Depreciation Expense 405,000
Increase in Accounts Receivable 1,000,000
Payment of Dividends 500,000

1. Determine the net income reported for the year 2022

a 2,345,000
b 3,835,000
c 3,345,000
d 3,335,000

23. Moira Co. reported a net income of 1,000,000 for the year 2021 along with the following :
Increase in Accounts Receivable 220,000
Increase in Accounts Payable 186,000
Increase in Inventory 148,000
Decrease in Non-Trade Note Payable 30,000

1. Determine the net cash provided/(used )in operating activities

a 818,000
b 848,000
c 788,000
d none of the above

24. P-Nation Company acquired 17,000,000 as their net income for the year 2020. The following information are related
to P-Nation year 2020:
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Increase in inventory.................................43,250
Amortization of intangibles........................6,900
Decrease in accounts receivable...........87,560
Decrease in accounts payable.............100,770
Gain on sale of machine...........................20,600
Depreciation of building.........................545,010

What is the amount of net cash provided or used by operating activities for year 2020 of P-Nation?
a. 17,474,850
b. 16,323,610
c. 16,237,110
d. 16,538,950

25. Carlyn Corporation’s accumulated depreciation—furniture account increased by P7,500,

while P2,750 of patent amortization was recognized between balance sheet dates. There
were no purchases or sales of depreciable or intangible assets during the year. In addition,
the income statement showed a loss of P4,000 from the sale of land and the net income of P107,500. How much is the
net cash flow from operating activities?

A. P 168,250
B. P 167,563
C. P 340,890
D. P 435,033

26. Rainbow Corporation purchased land for P360,000. Later in the year, the company sold a
different piece of land with a book value of P180,000 for P120,000. How much is the loss on sale of the land?

A. P 50,000
B. P 70,000
C. P 60,000
D. P 90,000

27. The cost of merchandise sold reported on the income statement was P770,000. The
accounts payable balance decreased P44,000, and the inventory balance decreased by
P66,000 over the year. Determine the amount of cash paid for merchandise.

A. P 749,000
B. P 748,000
C. P 750,000
 21

D. No Answer

28. Sales reported on the income statement were P480,000. The accounts receivable balance
increased P54,000 over the year. Determine the amount of cash received from customers.

A. P 426,000
B. P 462,000
C. P 444,000
D. P 450,000

1. The information below has been provided by the Ramona Company for the year 2018.
Purchases of Plant Assets: P250,000
Proceeds from the sale of ordinary shares: P320,000
Receipts from the customers: P780,000
Purchases of inventories: P290,000
Proceeds from sale of land: P630,000

What is the cash provided (used) by investing activities for the year ended December 31,2018?
a. 90,000
b. 410,000
c. 380,000
d. 700,000

29. On 2017, the Duffer Company earned a net income of 1,750,000 which included a depreciation expense of 230,000.
Below are the following changes in the account balances of the company.
Increases:
Inventory 270,000
Accounts Payable 540,000
Accounts Receivable 620,000
Decreases:
Accrued Liabilities 200,000
Prepaid Insurance 350,000

What is the total cash provided by operating activities?

a. 1,780,000
 22

b. 1,380,000
c. 1,320,000
d. 1,720,000

30. Mad Max Co. reported a net income of 640,000 for the year 2020. Included in the net income were depreciation
expense of 65,000 and a loss on sale of equipment of 2,500. On year 2020, the following accounts increased:
Accounts Receivables 190,000
Inventory 230,000
Prepaid Rent 175,000
Accounts Payable 75,000

What is the amount of cash provided by operating activities for Mad Max Co. for the year ended December 31,2020?
a. 57,500
b. 182,500
c. 187,500
d. 537,500

31. Avril L. Corporation had a net income for 2019 of 2,700,000. Below are the additional information:
Amortization of intangibles 320,000
Depreciation of equipment 110,000
Increase in accounts receivables 460,500
Increase in accounts payable 280,000

What is the cash provided by operating activities?

a. 3,169,500
b. 3,809,500
c. 3,429,500
d. 2,949,500

32. Camila Corporation made the following transactions during 2019:

Purchase of plant assets by issuing bonds 2,225,0000
Proceeds from the bonds issued 35,0000
Increase in Inventory 15,000
Purchase of ordinary shares 450,000
 23

Loans made to affiliated corporations 550,0000

Dividends paid to preference shareholders 330,000
Proceeds from the issuance of preference shares 100,000
Proceeds from the sale of long term investments 345,000
The net cash provided (used) from investing activities during 2019 is
a. 1,845,000 c. 1,800,000
b. 1,295,000 d. 2,570,000

33. The net income reported on the income statement for the year was P55,000, and depreciation of fixed assets for the
year was P22,000. The balances of the current asset and current liability accounts at the beginning and end of the year
are as follows:

End Beginnin
g
Cash P65,00 P70,000
0
Accounts receivable 100,000 90,000

Inventories 145,000 150,000

Prepaid expenses 7,500 8,000

Accounts payable 51,000 58,000
(merchandise
creditors)

The total amount reported for cash flows from operating activities in the statement of cash flows, using the indirect
method, is:

A. P33,000
B. P55,000
C. P65,500
D. P77,000

34. Marissa Company had net income of 3,000,000 as of 2021. Additional information are as follows:
Depreciation of assets ……………………………………………………………. 200,000
Amortization of Intangibles ……………………………………………………….. 240,000
Increase in accounts receivables ………………………………………………… 420,000
Decrease in Accounts Payable …………………………………………………… 540,000

Marissa’s net cash provided by operating activities for 2021 was

a. 2,480,000 c. 2,440,000
b. 2,680,000 d. 2,840,000
 24

35. Lovelyne Inc. reported net income of 760,000 for the year ended December 31, 2020. Included in the income were
depreciation expense of 12,200 and a gain on the sale of equipment of 6,700. The equipment had an historical cost of
50,000 and accumulated depreciation of 34,000. Each of the following accounts increased during 2020:
Patent 5,500
Bonds Payable 12,000
Available-for-sale equipment 3,000
Prepaid Rent 4,200
What is the amount provide by or used by the investing activities of Lovelyne Inc. for the year ended December 31,
2020?
a. 17,200 c. 31,200
b. 22,700 d. 14,200

36. Campo Company has the following items at year-end:

Cash in bank 22,000
Petty cash 700
Short-term paper with maturity of 2 months 10,200
Postdated checks 3,300
Campo should report cash and cash equivalents of
a. 22,000. c. 22,700.
b. 32,900. d. 36,200.

Kennison Company has cash in bank of $10,000, restricted cash in a separate account of
$3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should
report cash of
a. $9,000.
b. $10,000.
c. $12,000.
d. $13,000.
75. Kaniper Compan
37. Labio Inc. has cash in bank of 9,000, restricted cash in a separate account of 2,500, and a bank overdraft in an
account at another bank of 2,000. Labio should report cash of
a. 2,500. b. 9,000.
. 9,500. d. 11,500.

resh, Inc. had the following bank reconciliation at March 31, 2010:
Balance per bank statement, 3/31/10 $37,200
Add: Deposit in transit 10,300
47,500
 25

Less: Outstanding checks 12,600

Balance per books, 3/31/10 $34,900
Data per bank for the month of April 2010 follow:
Deposits $46,700
Disbursements 49,700
All reconciling items at March 31, 2010 cleared the bank in April. Outstanding checks at
April 30, 2010 totaled $6,000. There were no deposits in transit at April 30, 2010. What is
the cash balance per books at April 30, 2010?
a. $28,200
b. $31,900
c. $34,200
d. $38,500
38. Navasca Co. had the following bank reconciliation at March 31, 2018:
Balance per bank statement, 3/31/18 37,200
Add: Deposit in transit 10,300
47,500
Less: Outstanding checks 12,600
Balance per books, 3/31/18 34,900
Data per bank for the month of April 2018 follow:
Deposits 46,700
Disbursements 49,700
All reconciling items at March 31, 2018 cleared the bank in April. Outstanding checks at April 30, 2018 totaled 6,000.
There were no deposits in transit at April 30, 2018. What is the cash balance per books at April 30, 2018?
a. 28,200 b. 31,900
c. 34,200 d. 38,500
Consider the following: Cash in Bank – checking account of $13,500, Cash on hand of
$500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling
$124,000. How much should be reported as cash in the balance sheet?
a. $ 13,500.
b. $ 14,000.
c. $ 17,500.
d. $131,500.
39. Consider the following: Cash in Bank – checking account of 13,500, Cash on hand of 500, Post-dated checks
received totaling 3,500, and Certificates of deposit totaling 124,000. How much should be reported as cash in the
balance sheet?
a. 13,500. b. 14,000.
c. 17,500. d. 131,500.

40. The net income of Helsinki Corporation for December 31, 2020 is 2,800,000. Net income is composed of 19,000
depreciation expense and 3,400 gain on sale of machinery. Machinery had an historical cost of 70,000 and accumulated
 26

depreciation of 23,000. Helsinki Corporation also incurred a loss of selling equipment of 2,000. It has an historical cost of
28,000 and 13,000 accumulated depreciation.

Helsinki Corporation's net cash provided or used by investing activities for the year end was

a. 2,736,600
b. 63,400
c. 54,800
d. 98,000

41. Hayi Company had equity transactions at year end 2021. Dividends paid was 200,000. Ordinary shares purchased
from Suhyun Co. was costing 1,960,000. Hayi Company also had a cash proceeds from selling investment in Bob Co. of
344,000.

What amount should Hayi Company recognize as net cash from investing activities?
a. 1,616,000
b. 1,416,000
c. 1,816,000
d. 1,960,000

42. In 2020, Robi Corporation has depreciation expense of 50,000, increase in inventory 65,000 and an increase of
13,000 in accounts receivable. What will be Robi Corporation's net cash provided (used) by operating activities if their net
income for the year is 122,000?
a. 88,000
b. 200,000
c. 150,000
d. 94,000

43. In the preparation of Marquina's cash flow statement for the year end 2020, the change in amounts available were
Increase of Accounts Payable..........................10,000
Increase of Prepaid Rent.....................................7,600
Decrease of Accounts Receivable..................32,500
 27

Decrease of Non-trade note payable............15,000

Increase in Prepaid Insurance.........................18,000
Decrease in Accrued Liabilities..........................4,000

By this information above, what will be shown for net cash in operating activities by Marquina's Company upon earning
net income of 310,000?
a. 322,900
b. 307,900
c. 292,900
d. 309,100

44. The Ciao Company provides the following information about its activities in the year 2018.

 Marketable securities purchased: $45,000

 Treasury stock purchased: $56,000
 Inventory purchased: $412,000
 Land sold: $95,000
 Machinery purchased: $278,000
 Common stock issued: $168,000

What is the net cash provided/used by investing activities to be reported in the statement of cash flows of Ciao Company?

a. 45, 000

b. 228,000

c. 86, 000

d. 0

45. The Bella Company provides the following information for the year 2018:

1. Old plant asset sold for $164,000 and the gain on such sale was of $5,000.
2. Treasury stock purchased for $42,000.
3. Investment purchased for $25,000.
4. A new plant asset purchased for $115,000.
5. Common stock issued for $375,000

What is the net cash provided/used by investing activities for Bella Company using above information?
 28

a. 300, 000

b. 25, 000

c. 24, 000

d. 14, 000

46. The Tokyo 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

 Treasury stock purchased: $35,000
 Increase in accounts payable: $18,600
 Note receivable collected: $50,000
 Increase in inventory: $14,800
 Decrease in non-trade notes payable: $30,000
 Accounts payable paid: $585,000
 Increase in available for sale securities: $32,000
 Dividends paid: $190,000
 Bonds payable issued: $340,000
 Common stock issued: $175,000

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

What is the net cash provided (used) by operating activities using indirect method?

a. 115, 800

b. 15, 800

c. 0

d. 100, 000

47. Sergio Company provides only the following information for the year 2018:

 Net loss: $35,000

 Increase in accounts receivable: $4,050
 Depreciation expense: $42,000

What is the net cash provided (used) by operating activities of Sergio Company using indirect method?
 29

a. 72, 950

b. 77, 000

c. 2, 950

d. 4, 050

48. Lala Inc. on its year-end had a net income of P900,000. Additional information is as follows:

Amortization and Depreciation ……………………………….. 265,000

Proceeds from sale of equipment…………………………….. 540,000

Purchase of Patents……………………………………………. 350,000

Increase in Inventory……………………………………………. 60,000

Purchase of land…………………………………………………700,000
What is the amount of net cash used in investing activities?

a. 510,000

b. 160,000

c. 245,000

d. 1,050,000
30