1. In 2011, a typhoon completely destroyed a building belonging to Carpet
Corporation. The building cost Php 2,500,000 and had accumulated depreciation
of Php 1,200,000 at the time of the loss. Carpet received a cash settlement from
the insurance company and reported a loss of Php 525,000. In Carpet's 2011
cash flow statement, how much would be the net changes that would be reported
in the cash flows from investing activities section?
SOLUTION:
Book Value of Building
Cost
Php 2,500,000
Less: Accumulated Depreciation
Php 1,200,000
Php 1,300,000
Less: Amount of Loss
Php 525,000
Cash received from insurance company
Php 775,000 increase
(Inflow-investing activity)
2. Darwin Company provided the following relevant information involving its
operating activities for the year ended December 31, 2011.
Accrued interest payable recognized
12-31-10
12-31-11
P 40, 000
P 50, 000
72, 800
75, 600
3, 100
4, 940
Depreciation expense recognized
Prepaid expense recognized
For the year ended December 31, 2011, Darwin Company reported a net income
after tax of P 648, 000.
What is the net cash flow for operating activities that would be shown in the cash
flow statement?
SOLUTION:
NET INCOME FOR 2011
P 648, 000
Adjustment:
Depreciation expense, 2011
75, 600
Increase in accrued interest (50000 – 40000)
10, 000
Increase in prepaid expense (4940 – 3100)
(1840)
CASH PROVIDED BY OPERATING ACTIVITIES
P 731, 760
3. Goldfish company had the following activities during 2011:

Acquired 2000 shares of stock in starfish, Inc. for P260, 000.

Sold an investment in Water for P350, 000 when the carrying value was
P330, 000.

Acquired a P500, 000, 4-year certificate of deposit from a bank (during the
year, interest of 37500 was paid to Goldfish).

Collected dividends of 12000 on available for sale investment.
In Goldfish Corporation’s 2011 statement of cash flows, how much
should be the net cash used in investing activities?
SOLUTION:
Acquisition of 2000 shares of stock in starfish
(260000)
Sale of investment in Water
350, 000
Acquisition of a 4-year certificate of deposit
(500000)
NET CASH FLOW USED IN INVESTING ACTIVITIES P 410, 000
4. The net income for the year ended December 31, 2011 for Knot Corporation was
3,520,000. Additional data follow:
Purchase of plant assets
2,800,000
Depreciation of plant assets
1,480,000
Net decrease in non-cash current assets
290,000
Dividends declared on plant assets
970,000
Loss on sale of equipment
130,000
What amount should be the cash provided from operating activities in
Knot’s statement of cash flows for the year ended December 31, 2011?
SOLUTION:
Net Income
3,520,000
Depreciation of plant assets
1,480,000
Net decrease in non-cash current assets
290,000
Loss on sale of equipment
130,000
Cash provided from operating activities
5,420,000
5. Bargain Company reported net income of 3,000,000 for 2011. Changes occurred
in several balance sheet accounts during 2011 as follows:
Investment in associate, carried @ equity
400,000 increase
Premium on bonds payable
50,000 decrease
Accumulated Dep’n,
caused by major repair of equipment
200,000 decrease
Deferred tax liability
150,000 increase
In 2011 statement of cash flows, how much should be reported as net
cash provided by operating activities?
SOLUTION:
Net Income
3,000,000
Increase in investment in associate
(400,000)
Decrease in premium on bonds payable
(50,000)
Increase in deferred tax liability
150,000
Net cash inflow – operating activities
2,700,000