FSW-Cash Flow 070218
FSW-Cash Flow 070218
FSW-Cash Flow 070218
1. At December 31, year 1, Kale Co. had the following balances in the accounts it
maintains at First State Bank:
Checking account #101 P175,000 Checking account #201 (10,000) Money market account
25,000 90-day certificate of deposit, due 2/28/Y2 50,000 180-day certificate of deposit, due
3/15/Y2 80,000 Kale classifies investments with original maturities of three months or less as
cash equivalents. In its December 31, year 1 balance sheet, what
amount should Kale report as cash and cash equivalents?
a. P190,000
b. P200,000
c. P240,000
d. P320,000
2. The primary purpose of a statement of cash flows is to provide relevant
information about
a. Differences between net income and associated cash receipts and
disbursements.
b. An enterprise’s ability to generate future positive net cash flows.
c. The cash receipts and cash disbursements of an enterprise during a period. d. An
enterprise’s ability to meet cash operating needs.
3. Mend Co. purchased a three-month US Treasury bill. Mend’s policy is to treat as cash
equivalents all highly liquid investments with an original maturity of three months or less when
purchased. How should this purchase be reported in Mend’s statement of cash flows?
a. As an outflow from operating activities. b.
As an outflow from investing activities. c. As
an outflow from financing activities. d. Not
reported.
B. Statement of Cash Flows Classification
Year ended December 31 Year 2 Year 1 Net credit sales P6,400,000 P4,000,000
Cost of goods sold 5,000,000 3,200,000 Gross profit 1,400,000 800,000 Expenses
(including income taxes) 1,000,000 520,000 Net income $400,000 P280,000
Additional information available included the following:
All accounts receivable and accounts payable are related to trade merchandise. Accounts
payable are recorded net and always are paid to take all of the discount allowed. The allowance
for doubtful accounts at the end of year 2 was the same as at the end of
year 1; no receivables were charged against the allowance during year 2.
The proceeds from the note payable were used to finance a new store building.
Capital stock was sold to provide additional working capital.
33. Cash collected during year 2 from accounts receivable amounted to a.
P5,560,000
b. P5,840,000
c. P6,140,000
d. P6,400,000
34. Cash payments during year 2 on accounts payable to suppliers amounted to a.
P4,670,000
b. P4,910,000
c. P5,000,000
d. P5,150,000
35. Net cash provided by financing activities for year 2 totaled a.
P140,000
b. P300,000
c. P500,000
d. P700,000
36. Net cash used in investing activities during year 2 was a. P
80,000
b. P530,000
c. P610,000
d. P660,000
37. Bee Co. uses the direct write-off method to account for uncollectible accounts
receivable. During an accounting period, Bee’s cash collections from customers equal sales
adjusted for the addition or deduction of the following amounts:
Accounts written off Increase in accounts receivable balance a. Deduction Deduction b.
Addition Deduction c. Deduction Addition d. Addition Addition G. International Financial
Reporting Standards (IFRS)
38. Rice Corporation prepares its financial statements in accordance with IFRS. Rice
must report amounts paid for interest on a note payable on the statement of cash flows
a. In operating activities. b.
In financing activities.
c. Either in operating activities or financing activities. d.
Either in investing activities or financing activities.
39. Filigree Corporation prepares its financial statements in accordance with IFRS.
Filigree acquired equipment by issuing 5,000 shares of its common stock. How should
this transaction be reported on the statement of cash flows?
a. As an outflow of cash from investing activities and an inflow of cash from
financing activities.
b. As an inflow of cash from financing activities and an outflow of cash from
operating activities.
c. At the bottom of the statement of cash flows as a significant noncash
transaction.
d. In the notes to the financial statements as a significant noncash transaction.