I. Multiple Choice. Shade the box of the letter representing your answer.

(2 points each)

1. The method of presenting cash flow from operations when net income is adjusted for items without any cash
effect is called:
A. Direct method
B. Indirect method
C. Allowance method
D. Direct write off method

2. Cash dividends paid to shareholders in the statement of cash flows is shown under
A. Operating activities
B. Investing activities
C. Financing activities
D. None of the above

3. Ocean Company provided the following information:

2015 2014
Share capital 5,000,000 4,800,000

m
er as
Retained earnings 3,000,000 2,500,000

co
Dividends payable 1,200,000 1,800,000

eH w
Net income 2,000,000

o.
rs e
What amount was paid for dividends in 2015?
ou urc
A. 2,100,000
B. 1,500,000
C. 1,900,000
o

D. 2,600,000
aC s
vi y re

Retained earnings, beginning 2,500,000

Net income 2,000,000
Dividends (1,500,000)
Retained earnings, ending 3,000,000
ed d

Dividends declared 1,500,000

ar stu

Dividends payable, beginning 1,800,000

Dividends paid (2,100,000)
Dividends payable, ending 1,200,000
is
Th

For the next 4 items:

Capiz Company provided the following for the current year:

Increase in long-term debt P 5,000,000

sh

Purchase of treasury shares 1,000,000

Depreciation expense 1,500,000
Gain on sale of equipment 500,000
Proceeds from issuance of share capital 4,000,000
Purchase of equipment for cash 7,000,000
Proceeds from sale of equipment 2,000,000
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 Payment of cash dividend 2,500,000
Net income 8,000,000
Increase (decrease) in working capital accounts:
Accounts receivable 2,000,000
Inventory (3,500,000)
Trade accounts and notes payable 4,000,000
Income tax payable (4,500,000)
Cash balance, January 1 6,000,000

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

A. P 10,000,000
B. P 11,000,000
C. P 7,500,000
D. P 8,500,000

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5. What is the net cash used in investing activities?

er as
A. P 7,000,000

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B. P 5,000,000

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C. P 9,000,000
D. P2,000,000

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rs e
ou urc
6. What is the net cash provided in financing activities?
A. P9,000,000
B. P8,000,000
C. P5,500,000
o

D. P2,500,000
aC s
vi y re

7. What is the cash, ending balance?

A. P 14,000,000
B. P 15,000,000
ed d

C. P 16,500,000
D. P 17,500,000
ar stu

Operating Investing Financing

Increase in long-term debt 5,000,000 5,000,000
is

(1,000,000
Purchase of treasury shares 1,000,000
Th

)
Depreciation expense 1,500,000 1,500,000
Gain on sale of equipment 500,000 (500,000)
Proceeds from issuance of share capital 4,000,000 4,000,000
sh

(7,000,000
Purchase of equipment for cash 7,000,000
)
Proceeds from sale of equipment 2,000,000 2,000,000
(2,500,000
Payment of cash dividend 2,500,000
)
Net income 8,000,000 8,000,000
Increase (decrease) in working capital
accounts:
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 (2,000,000
Accounts receivable 2,000,000
)
Inventory -3,500,000 3,500,000
Trade accounts and notes payable 4,000,000 4,000,000
(4,500,000
Income tax payable -4,500,000
)
Cash balance, January 1 6,000,000
10,000,00 (5,000,000
Total 0 ) 5,500,000
10,000,00
Operating 0
(5,000,000
Investing )
Financing 5,500,000
Cash balance, January 1 6,000,000
16,500,00
0

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For the next 3 items:

er as
Beal Company reported the following changes in the statement of financial position accounts during the current

co
year:

eH w
o.
Increase/(Decrease)
Assets
rs e
ou urc
Cash and cash equivalents 120,000
Short-term investments 300,000
Accounts receivable, net 0
o

Inventory 80,000
Long-term investments (100,000)
aC s

Property, plant and equipment 700,000

vi y re

Accumulated depreciation 0
1,100,000
ed d

Liabilities and Shareholders’ Equity

ar stu

Accounts payable and accrued liabilities (5,000)

Dividends payable 160,000
Short term bank debit 325,000
Long term debt 110,000
is

Ordinary share capital, P10 par 100,000

Share premium 120,000
Th

Retained earnings 290,000

1,100,000
sh

The following additional information to the current year:

 Net income for the current year was P790,000.
 Cash dividend of P500,000 was declared.
 Equipment costing P600,000 and having a carrying amount of P350,000 was sold for P350,000.
 Equipment costing P110,000 was acquired through issuance of long term debt.
 A long term investment was sold for P135,000. There were no other transactions affecting the long-term
investments.
 10,000 ordinary shares were issued for P22 a share.
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 8. What is the net cash provided by operating activities?
A. 1,600,000
B. 1,040,000
C. 920,000
D. 705,000

9. What is the net cash used in investing activities?

A. 1,005,000 bonus
B. 1,190,000
C. 1,275,000
D. 1,600,000

10. What is the net cash provided by financing activities?

A. 20,000
B. 45,000
C. 150,000
D. 205,000

Increase/(Decrease)

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Operating Investing Financing

er as
Cash and cash equivalents 120,000

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Short-term investments 300,000 (300,000)

eH w
Accounts receivable, net 0

o.
Inventory 80,000 (80,000)
Long-term investments rs e (100,000) (35,000) 135,000
ou urc
Property, plant and equipment 700,000 350,000
(1,190,000)
Accumulated depreciation 250,000
o

Accounts payable and accrued liabilities (5,000) (5,000)

aC s

Dividends payable 160,000 160,000

vi y re

Short term bank debit 325,000 325,000

Long term debt 110,000
Ordinary share capital, P10 par 100,000 100,000
ed d

Share premium 120,000 120,000

ar stu

Retained earnings 290,000

Net income 790,000
Dividends (500,000)
is

Total 920,000 (1,005,000) 205,000

PPE
Th

Sold (600,000)
Purchased in exchange of debt 110,000
Additional acquisition 1,190,000
sh

Increase in PPE 700,000

For the next 2 items:

Roe Company provided the following account balances:

2014 2015
Machinery 2,500,000 3,200,000
Accumulated depreciation 1,020,000 1,200,000
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 Loss on sale of machinery 40,000

During 2015, the entity sold for P260,000 a machine with original cost of P400,000 and purchases an item of
machinery.

11. What is the depreciation of machinery for 2015?

A. 180,000
B. 240,000
C. 280,000
D. 320,000

Beginning 1,020,000
Accumulated depreciation from the sale (100,000)
Depreciation expense 280,000
Ending 1,200,000
Sale of machinery:
Acquisition cost 400,000
Less: Book value

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er as
Selling price 260,000

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Loss on sale 40,000 (300,000)

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Accumulated depreciation 100,000

o.
rs e
12. What is the cost of the machinery purchased in 2015?
ou urc
A. 340,000
B. 700,000
C. 960,000
o

D. 1,100,000
aC s
vi y re

Beginning 2,500,000
Sale (400,000)
Acquisition 1,100,000
Ending 3,200,000
ed d
ar stu

13. Zodiac Company had the following activities for the current year:

Payment for the retirement of bonds payable 3,700,000

is

Payment of cash dividend declared in the prior

300,000
year
Th

Carrying amount of convertible preference shares

600,000
converted into ordinary shares
Proceeds from sale of treasury shares 500,000
sh

What is the net cash used in financing activities?

A. 4,000,000
B. 2,900,000
C. 3,500,000
D. 3,570,000

(3,700,000
Payment for the retirement of bonds payable
)
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 Payment of cash dividend declared in the (300,000)
prior year
Proceeds from sale of treasury shares 500,000
(3,500,000
)

14. Alpha Company had the following activities during the current year:
 Acquired 2,000 shares in Maybel for P260,000.
 Sold an investment in Rate Motors for P350,000 when the carrying amount was P330,000.
 Acquired a P500,000, 4-year certificate for deposit from a bank. During the year, interest of P37,500 was
paid to Alpha.
 Collected dividends of P12,000 on share investments.

What is the net cash used in investing activities?

A. 372,500
B. 360,500
C. 398,000
D. 410,000

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er as
Acquired shares (260,000)

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eH w
Sold investment 350,000
Certificate (500,000)

o.
(410,000)
rs e
ou urc
15. Batuan Company reported net income of P800,000 for the current year. The expenses included depreciation of
P600,000. Net changes in working capital accounts for the year were as follows:
o

Debit Credit
aC s

Cash 200,000
vi y re

Trade accounts receivable 500,000

Inventory 100,000
Prepaid expenses 20,000
ed d

Accrued expenses 30,000

ar stu

Income tax payable 50,000

Trade accounts payable 140,000
is

What is the net cash provided by operating activities for the current year?
A. 1,100,000
Th

B. 780,000
C. 860,000
D. 600,000
sh

Net income 800,000

Depreciation 600,000
Trade accounts receivable (500,000)
Inventory 100,000
Prepaid expenses (20,000)
Accrued expenses 30,000
Income tax payable (50,000)
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 Trade accounts payable 140,000
1,100,000

For the next 3 items:

Karr Company reported net income of P3,000,000 for the current year. The following charges occurred in several
accounts:

Equipment 250,000 increase

Accumulated depreciation 400,000 increase
Note payable 300,000 increase

 During the year, the entity sold equipment costing P250,000, with accumulated depreciation of P120,000 at
a gain of P50,000.
 In December, the entity purchased equipment costing P500,000 with P200,000 cash and a 12% note payable
of P300,000.

16. What is the depreciation expense for the year?

A. 520,000

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B. 400,000

er as
C. 280,000

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D. 120,000

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o.
Increase in Acc. Dep. 400,000
rs e
Sale of equipment 120,000
ou urc
520,000

17. What is the net cash used in investing activities?

o

A. 350,000
aC s

B. 120,000
vi y re

C. 220,000
D. 20,000
ed d

Sale of equipment 180,000

ar stu

Purchase of equipment - cash payment (200,000)

(20,000)

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

is

A. 3,400,000
Th

B. 3,470,000
C. 3,520,000
D. 3,570,000
sh

Net income 3,000,000

Depreciation expense 520,000
Gaon on sale (50,000)
3,470,000

19. Mandarin Company had the following transactions for the current year:

Acquisition of equity shares for cash (cash was borrowed 2,250,000

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 from the bank)
Issuance of 30,000 preference shares of P100 par value for 4,000,000
land having fair value of
Issuance of 5,000, 12%, P1,000 face value of bonds for cash 4,900,000
Payment of a short term bank loan 1,500,000
Sale of investment securities for cash 9,950,000
Purchase of patent for cash 2,750,000
Increase in customer deposits 1,100,000

What is the net cash provided by investing activities?

A. 3,700,000
B. 4,950,000
C. 5,950,000
D. 7,700,000

Acquisition of equity shares for cash (cash was borrowed from the bank) -2,250,000
Sale of investment securities for cash 9,950,000
Purchase of patent for cash -2,750,000

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er as
4,950,000

co
eH w
20. Blacktown Company reported the following account balances:

o.
Dec 31 Jan 1
rs e
Accounts payable 500,000 650,000
ou urc
Inventory 300,000 250,000
Accounts receivable 800,000 900,000
o

Prepaid expenses 400,000 600,000

aC s

All purchases of inventory were on account.

vi y re


 Depreciation expense of P900,000 was recognized.
 Equipment was sold during the year and a gain of P300,000 was recognized.
ed d

The entity provided the following cash flow information:

ar stu

Cash collected from customers 9,500,000

Cash paid for inventory (4,100,000)
Cash paid for other expenses (1,400,000)
is

Cash flow from operations 4,000,000

Th

What is the net income for the current year?

A. 3,300,000
B. 3,400,000
sh

C. 3,000,000
D. 3,900,000

Cash flow from operations 4,000,000

Accounts payable 150,000
Inventory 50,000
Accounts receivable (100,000)
Prepaid expenses (200,000)
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 Depreciation expense (900,000)
Gain on sale 300,000
3,300,000

m
er as
co
eH w
o.
rs e
ou urc
o
aC s
vi y re
ed d
ar stu
is
Th
sh

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