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 Less: Accumulated Depreciation Less: Amount of Loss Cash received from insurance company (Inflow-investing activity) Php 2,500,000 Php 1,200,000 Php 1,300,000 Php 525,000

Php 775,000 increase

2. Darwin Company provided the following relevant information involving its operating activities for the year ended December 31, 2011.

12-31-10 Accrued interest payable recognized Depreciation expense recognized Prepaid expense recognized P 40, 000 72, 800 3, 100

12-31-11 P 50, 000 75, 600 4, 940

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 Adjustment: Depreciation expense, 2011 Increase in accrued interest (50000 40000) Increase in prepaid expense (4940 3100) 75, 600 10, 000 (1840) P 648, 000

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 Corporations 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 Sale of investment in Water Acquisition of a 4-year certificate of deposit (260000) 350, 000 (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 Depreciation of plant assets Net decrease in non-cash current assets Dividends declared on plant assets Loss on sale of equipment 2,800,000 1,480,000 290,000 970,000 130,000

What amount should be the cash provided from operating activities in Knots statement of cash flows for the year ended December 31, 2011? SOLUTION: Net Income Depreciation of plant assets Net decrease in non-cash current assets Loss on sale of equipment Cash provided from operating activities 3,520,000 1,480,000 290,000 130,000

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 Premium on bonds payable Accumulated Depn, caused by major repair of equipment Deferred tax liability 200,000 decrease 150,000 increase 400,000 increase 50,000 decrease

In 2011 statement of cash flows, how much should be reported as net cash provided by operating activities?

SOLUTION: Net Income Increase in investment in associate Decrease in premium on bonds payable Increase in deferred tax liability 3,000,000 (400,000) (50,000) 150,000

Net cash inflow operating activities

2,700,000