Institute of Business Management

CASH FLOW STATEMENT

Cash flow statement represents the classification of inflow and outflow of cash during the period
from operating, investing and financing activities.
An enterprise should prepare a Cash Flow Statement in accordance with the requirement of IAS-
7 (Revised 1992) and should present it as an integral part of its financial statements for each
period for which financial statements are presented.
IAS-7 (Revised 1992) supersedes IAS-7, Statement in Changes in Financial position, approved
in July 1977.
IAS-7 (Revised 1992) becomes operative for financial statements covering period beginning on
or after 1 January 1994.
Objectives of Cash Flow Statement
Objectives and purpose of cash flow statement is to report a firm’s cash inflow and outflows
during a period of time, segregated into three categories: operating, investing and financing
activities. It is helpful to the financial managers and other users to assess and identify the
following:
 A company’s ability to generate future net cash inflows from operations to pay debts,
interest and dividend
 A company’s need for external financing
 The reasons for differences between net income and net cash flow from operating
activities.
 The effect of cash and non-cash investing and financing transactions.

PRESENTATION OF CASH FLOW STATEMENTS

Cash Flow Statement should report the input or output of cash during the period classified as
follows
1. Operating Activities
2. Investing Activities
3. Financing Activities

Definitions

Cash
It means cash on hand and Demand Draft (bank balance/bank O/D also)

Cash Equivalents
These are short term, highly liquid investments that are readily convertible to known amount of
cash and which are subject to an insignificant risk of changes in value.

Cash Flows
These are inflows and outflows of cash by operating, investing, and financing activities.
An enterprise should report cash flows from operating activities using either;
I. Direct Method
Whereby major classes of gross (actual) cash receipts and gross (actual) cash payments are
disclosed: or
II. Indirect Method
Whereby net profit or loss is adjusted for the effects of transactions of a non-cash nature, any
deferrals or accruals of past or future operating cash receipts or payments, and items of income
or expense associated with investing or financing cash flows.

Enterprises are encouraged to report cash flows from operating activities using the direct method.

Operating Activities
Account heads which are used to prepare income statement will go to Operating Activities.

Investing Activities
Cash receipt from selling of investment or Cash payment to acquire investment or plant
plant assets assets
cash receipts from collecting principal amount Cash payment made as an advance to
of loan borrowers

Financing Activities
Cash receipts from both short term and long Repayment of amount borrowed(excluding
term borrowings interest payment)
Cash received from owners like stock or bond Cash payment to owners like dividend
issue
 Cash flow statement is the Reconciliation of Net Profit to the Net Cash Flows.
Cash Flow Statement
For the Period Ended December 20XX
Using Direct Method

Cash flow from operation activities

Cash receipts from customers xxx
Interest received (actual cash received) xxx
Dividend received (actual cash received) xxx
Cash generated from operations xxx
Cash paid to suppliers and employees (xxx)
Interest paid (xxx)
Income tax paid (xxx)
Net Cash from operating activities xxx
Cash flow from investing activities
Purchase of fixed assets (actual cash paid) (xxx)
Sale of fixed assets (actual cash received) xxx
Net Cash flow from investing activities xxx
Cash flow from financing activities
Issue of share capital (actual cash received) xxx
Issue of debenture (actual cash received) xxx
Received from long term loans (actual cash received) xxx
Payment of long term loans (actual cash paid) (xxx)
Dividend paid (actual cash paid) (xxx)
Cash generated from financing activities xxx
Increase (decrease) in net cash during the period xxx
Add:
Cash and cash equivalents at beginning of period xxx
Cash and cash equivalents at ending of period xxx
 Cash flow statement is the Reconciliation of Net Profit to the Net Cash Flows.
Cash Flow Statement
For the Period Ended December 20XX
Using indirect Method

Cash flow from operation activities

Net profit before interest and tax and extra ordinary items xxx
Adjustment for; (non-cash items) xxx
Add:
Depreciation (for the period) xxx
Bed Debts expense xxx
Amortization of Goodwill, patent or intangible assets xxx
Amortization of discount on debenture or share xxx
Loss of sale of fixed assets xxx xxx
Less:
Gain on sale of fixed assets xxx
Dividend and interest received on investment xxx (xxx)
Operating profit xxx
Increase in current assets (except cash/bank) (xxx)
Decrease in current assets (except cash/bank) xxx
Increase in current liabilities (except tax, interest and dividend payable) xxx
Decrease in current liabilities (except tax, interest and dividend payable) (xxx) (xxx)
Cash generated from operation xxx
Interest paid (actual cash paid) (xxx)
Income tax paid (actual cash paid) (xxx)
Net Cash from operating activities xxx
Cash flow from investing activities
Purchase of fixed assets (actual cash paid) (xxx)
Sale of fixed assets (actual cash received) xxx
Interest received (actual cash received) xxx
Dividend received (actual cash received) xxx
xxx
Cash flow from financing activities
Issue of share capital (actual cash received) xxx
Issue of debenture (actual cash received) xxx
Received from long term loans (actual cash received) xxx
Payment of long term loans (actual cash paid) (xxx)
Dividend paid (actual cash paid) (xxx)
Cash generated from operations xxx
Increase (decrease) in net cash during the period xxx
Add:
Cash and cash equivalents at beginning of period xxx
Cash and cash equivalents at ending of period xxx
Practice Problem
Following the transactions of Miyota Communications. You are required to categorize the transactions in
three cash flow activities. (Direct Method)
S. No. Transactions Category
A Made payments on accounts payable to merchandise suppliers. Operating
B Paid the principal amount of note payable to First Bank. Financing
C Paid interest charges relating to a note payable to First Bank. Operating
D Issued bonds payable for cash; management plans to se this cash in the Financing
near future to expand manufacturing and warehouse capabilities.
E Paid salaries to employees in the finance department. Operating
F Collected an account receivable from a customer. Operating
G Transferred cash from the general bank account into a money market No activity
fund.
H Used the cash received in d above to purchase land and building suitable Investing
for a manufacturing facility.
I Made a year-end adjusting entry to recognize depreciation expense. No activity
J At year-end purchased for cash an insurance policy covering the next 12 Operating
months.
K Paid the quarterly dividend on preferred stock. Financing
L Paid the semiannual interest on bonds payable. Operating
M Received a quarterly dividend from an investment in the preferred stock Operating
of another corporation.
N Sold for cash an investment in the preferred stock of another Investing
corporation.
O Received cash upon the maturity of an investment in cash equivalent. Investing
PROBLEM 1: The accounting staff of Educators’ Outlet Inc. has assembled the following
information for the year ended December 31, 19--.
Cash sales ------------------------------------------------------------------------------------------ $800,000
Credit sales ------------------------------------------------------------------------------------------ 2500,000
Collections on accounts receivable -------------------------------------------------------------- 2200,000
Cash transferred from the money market fund to the general bank account -----------------250,000
Interest and dividends received ---------------------------------------------------------------------100,000
Purchases (all on account) ------------------------------------------------------------------------ 1800,000
Payments on accounts payable to merchandise suppliers -------------------------------------1500,000
Cash payment for operating expenses -----------------------------------------------------------1,050,000
Interest paid ------------------------------------------------------------------------------------------ 180,000
Income tax paid --------------------------------------------------------------------------------------- 95,000
Loans made to borrowers --------------------------------------------------------------------------- 500,000
Collections on loans (excluding receipts of interest) ------------------------------------------- 260,000
Cash paid to acquire plant assets ---------------------------------------------------------------- 3,100,000
Book value of plant assets sold -------------------------------------------------------------------- 660,000
Loss on sales of plant assets ------------------------------------------------------------------------- 80,000
Proceeds from issuing bonds payable ----------------------------------------------------------- 2500,000
Dividend paid ---------------------------------------------------------------------------------------- 120,000
Cash and cash equivalents, beginning of year --------------------------------------------------- 446,000
Cash and cash equivalents, end of year -----------------------------------------------------------------?---

INSTRUCTIONS Prepare a statement of cash flows using direct method of reporting cash
flows from operating activities.
Many of the items above will be listed in your statement without change. However, you will
have to combine certain given information to compute the amounts of (1) collections from
customers, (2) cash paid to suppliers and employees, and (3) proceeds from sales of plant assets.
(Hint: Not every item listed above is used in preparing a statement of cash flow.)
Solution
Description Amount Amount
Cash flow from operating activities
Collection from Customers – W1 3,000,000
Interest and dividends received 100,000
Cash provided by operating activities 3100,000
Cash paid to suppliers and employees W2 2,550,000
Interest paid 180,000
Income tax paid 95,000
Cash disbursed from operating activities (2,825,000)
Net cash flow from operating activities 275,000
Cash flow from investing activities
Loans made to borrowers (500,000)
Collections on loans 260,000
Cash paid to acquire plant assets (3,100,000)
Proceeds from sales of plant assets - W3 580,000
Net cash flow from investing activities (2,760,000)
Cash flow from financing activities
Proceeds from issuing bonds payable 2,500,000
Dividend paid (120,000)
Net cash flow from financing activities 2,380,000
Increase (Decrease) in cash during the year (105,000)
Add. Cash and cash equivalent – opening 446,000
Cash and cash equivalent – ending 341,000

Working - 1
Description Amount Amount
Cash sales 800,000
Collection of accounts receivables 2,200,000
Total 3,000,000

Working - 1
Description Amount Amount
Payments on accounts payable to merchandise suppliers 1,500,000
Cash payment for operating expenses 1,050,000
Total 2,550,000

Working 3
Description Amount Amount
Book value of plant asset sold 660,000
Loss on sales of plant assets (80,000)
Proceeds from sale of plant assets 580,000
PROBLEM # 2: The accounting staff of TeleGift Corporation has assembled the following
information for the year ended December 31, 19--.
Cash sales ----------------------------------------------------------------------------------------- $402,000
Credit sales ----------------------------------------------------------------------------------------- 3,420,000
Collections on accounts receivable ------------------------------------------------------------- 3,193,000
Cash transferred from the money market fund to the general bank account -----------------180,000
Interest and dividends received --------------------------------------------------------------------- 40,000
Purchases (all on account) ----------------------------------------------------------------------- 1,950,000
Payments on accounts payable to merchandise suppliers ------------------------------------ 2,036,000
Cash payment for operating expenses ---------------------------------------------------------- -- 822,000
Interest paid -------------------------------------------------------------------------------------------- 99,000
Income tax paid -------------------------------------------------------------------------------------- 180,000
Loans made to borrowers --------------------------------------------------------------------------- 220,000
Collections on loans (excluding receipts of interest) ------------------------------------------- 145,000
Cash paid to acquire plant assets ---------------------------------------------------------------- 1,640,000
Book value of plant assets sold ---------------------------------------------------------------------- 70,000
Loss on sales of plant assets ------------------------------------------------------------------------- 35,000
Proceeds from issuing capital stock ------------------------------------------------------------- 1,355,000
Dividend paid ---------------------------------------------------------------------------------------- 180,000
Cash and cash equivalents, beginning of year --------------------------------------------------- 297,000
Cash and cash equivalents, end of year -----------------------------------------------------------------?---

INSTRUCTIONS Prepare a statement of cash flows using direct method of reporting cash
flows from operating activities.
Many of the items above will be listed in your statement without change. However, you will
have to combine certain given information to compute the amounts of (1) collections from
customers, (2) cash paid to suppliers and employees, and (3) proceeds from sales of plant assets.
(Hint: Not every item listed above is used in preparing a statement of cash flow.)
Solution
Description Amount $ Amount $
Cash flows from Operating Activities
Cash received from customers - 1 3,595,000
Interest and divided received 40,000
Cash provided by Operating Activities 3,635,000
Cash paid to suppliers and employees -2 (2,858,000)
Interest paid (199,000)
Income tax paid (180,000)
Cash disbursed for Operating Activities (3,137,000)
Net cash flows from Operating Activities 498,000
Cash flows from Investing Activities
Loans made to borrowers (220,000)
Collection on loans 145,000
Cash paid to acquire plant assets (1,640,000)
Proceeds from sale of plant assets - 3 35,000
Net cash used by Investing Activities (1,680,000)
Cash flows from Financing Activities
Proceeds from issuing capital stock 1,355,000
Dividend paid (180,000)
Net cash provided by Financing Activities 1,175,000
Net increase (decrease) in cash and cash equivalent (7,000)
Add. Cash and cash equivalent – opening balance 297,000
Cash and cash equivalent – ending balance 290,000

Working - 1
Description Amount $
Cash received from customers
Cash sales 402,000
Collection on accounts receivables 3,193,000
Cash received from customers 3,595,000

Working - 2
Description Amount $
Cash paid to suppliers and employees
Payment on account payable to suppliers 2,036,000
Cash payment for operating expenses 822,000
Cash paid to suppliers and employees 2,858,000

Working - 3
Description Amount $
Proceeds from sales of plant assets
Book value of plant assets sold 70,000
Lain on sales of plant assets 35,000
 Proceeds from sale of plant assets 35,000
PROBLEM # 3: The accounting staff of Carolina Crafts, Inc. has assembled the following information for
the year ended December 31, 1994.
Cash and cash equivalents, beginning of year ------------------------------------------------------------------ $45,200
Cash and cash equivalents, end of year --------------------------------------------------------------------------- 64,200
Cash paid to acquire plant assets ----------------------------------------------------------------------------------- 21,000
Proceeds from short term borrowing------------------------------------------------------------------------------ 10,000
Loans made to borrowers ---------------------------------------------------------------------------------------------- 5,000
Collections on loans (excluding receipts of interest) ------------------------------------------------------------ 4,000
Interest and dividends received ------------------------------------------------------------------------------------- 17,000
Cash received from customers -------------------------------------------------------------------------------------795,000
Proceeds from sale of plant assets ----------------------------------------------------------------------------------- 9,000
Dividend paid ------------------------------------------------------------------------------------------------------------ 65,000
Cash paid to suppliers and employees ---------------------------------------------------------------------------635,000
Interest paid ------------------------------------------------------------------------------------------------------------- 19,000
Income tax paid --------------------------------------------------------------------------------------------------------- 71,000

INSTRUCTIONS
Using this information, prepare a formal statement of cash flows. Include a proper heading for the
financial statement, and classify the given information into the categories of operating activities,
investing, and financing activities. Net cash flows from operating activities are determined by the direct
method. Place brackets around the dollar amounts of all cash disbursements

Solution
Description Amount $ Amount $
Cash Flow from Operating Activities
Interest and dividend received 17,000
Cash received from customers 795,000
Cash flow provided by operating activities 812,000
Cash paid to suppliers and employees 635,000
Interest paid 19,000
Income tax paid 71,000
Cash flow disbursed by operating activities (725,000)
Net cash flow generated by operating activities 87,000
Cash Flow from Investing Activities
Cash paid to acquire plant assets (21,000)
Proceeds from short term borrowing 10,000
Loan made to borrowers (5,000)
Collection on loan 4000
Proceeds from sale of plant assets 9,000
Net cash flow generated by investing activities (3,000)
Cash Flow from Financing Activities
Dividend paid (65,000)
Net cash flow generated by financing activities (65,000)
Net cash increase (decrease) 19,000
Add. Cash and cash equivalent – opening balance 45,200
 Cash and cash equivalent – ending balance 64,200
Cash flow statement through Indirect Method
Operating Activities

Net Income

Add:
Depreciation
Decrease in accounts receivable
Decrease in inventories
Decrease in prepaid expenses
Increase in account payable
Increase in accrued expense payable
Increase in deferred income tax payable
Non-operating losses deducted in computing net income

Less:
Increase in accounts receivable
Increase in inventories
Increase in prepaid expenses
Decrease in accounts payable
Decrease in accrued expense payable
Decrease in deferred income tax payable
Non-operating gains included in net income
Net cash provided by (used in) operating activities
PROBLEM # 1: The data below are taken from the income statement and balance sheet of All
Night Pharmacies, Inc.

Dec. 31 Jan. 1
1994 1994
Income statement:
Net income $400,000
Depreciation expense 120,000
Amortization of intangible assets 40,000
Gain on sale of plant assets 80,000
Loss on sale of investments 35,000
Balance sheets:
Accounts receivable $335,000 $380,000
Inventory 503,000 575,000
Prepaid expenses 22,000 10,000
Accounts payables (to merchandise suppliers) 379,000 410,000
Accrued expenses payable 180,000 155,000

Instructions:
Using this information, prepare a partial statement of cash flows for the year ended December
31, 1994, showing the computation of net cash from operating activities by the indirect method.

All Night Pharmacies, Inc.

Statement of Cash Flows
Indirect Method

Description Amount Amount

Net Income 400,000
Add.
Depreciation Exp 120,000
Amortization of Intangible Assets 40,000
Loss on sale of investment 35,000
Decrease in account receivable 45,000
Decrease in inventory 72,000
Increase in accrued expense payable 25,000
337,000
Less.
Gain on sale of plant assets 80,000
Increase in prepaid expenses 12,000
Decrease in accounts payable 31,000
(123,000)
Net cash provided by (used in) operating 614,000
activities
PROBLEM # 2
Selected data of balance sheet and income statement of Exon Corporation as on December 31,
2013 are given below. You are required to prepare the statement of cash flows using indirect
method. 2013 2012
Cash and cash equivalents......................................................................... $10,200
Accounts recievable.................................................................................... 11,100 13,200
Inventories...................................................................................................16,500 18,400
Notes payable (short term).........................................................................$22,900 25,000
Accounts payable........................................................................................16,200 12,800
Income tax payable.......................................................................................3,600 6,000
Transaction data for 2013:
Purchase of investment………….............................................................$ 20,000
Stock dividends............................................................................................12,500
Cash dividends…………………………………………………….……....25,000
Collection of loan...........................................................................................9,700
Depreciation expense.....................................................................................4,500
Purchase of machinery.…............................................................................55,000
Proceeds from sale of fixed assets................................................................12,100
Payment of long term debt............................................................................15,400
Gain on sale of investment..............................................................................2,200
Purchase of computers by issuing long term note payable..........................500,000
Issuance of long term debt to borrow cash................................................... 55,000
Net income...................................................................................................250,700
Solution
Exon Corporation
Statement of Cash Flows
Indirect Method

Description Amount Amount

Net Income 250,700
Add.
Depreciation 4,500
Decrease in A/c Receivables 2,100
Decrease in Inventory 1,900
Increase in A/c Payable 3,400
11,900
262,600
Less.
Gain on sale of Investment (2,200)
Decrease in Notes Payable (2,100)
Decrease in Tax Payable (2,400)
(6,700)
Cash Flow provided by Operating Activities 255,900
Cash Flow from Investing Activities
Purchase of Investment (20,000)
Collection of loan 9,700
Purchase of Machine (55,000)
Proceeds from sale of Fixed Assets 12,100
Cash flows provided by Investing Activities (53,200)
Cash Flow from Financing Activities
Cash dividend (25,000)
Payment of long term debt (15,400)
Issuance of long term debt 55,000
Cash Flow from Financing Activities 14,600
Net cash increase (decrease) 217,300
Add. Cash and cash equivalent-Opening 10,200
Cash and cash equivalent-ending 227,500
PROBLEM # 3:
Financial data of Auto Supply Corporation is given below to prepare the statement of cash flows
through indirect method.
Auto Supply
Balance Sheet
As on December 31, 2001
Particulars 2000 $ 2001 $
Assets
Cash 50,000 45,000
Marketable Securities 40,000 25,000
Account Receivable 320,000 330,000
Inventory 240,000 235,000
Plant and Equipment (Net) 600,000 640,000
Total Assets 1,250,000 1,275,000
Liabilities and Stockholders’ Equity
Accounts Payable 150,000 160,000
Accrued Expense Payable 60,000 45,000
Mortgage Notes Payable 0 70,000
Bond Payable 500,000 350,000
Capital Stock 160,000 160,000
Retained Earnings 380,000 490,000
Total Liabilities and Equity 1.250,000 1,275,000

Additional Information
1. Net income for the year amounted to $250,000.
2. Cash dividend is of $140,000 were declared and paid.
3. Company’s only noncash expense was depreciation which is $60,000.
4. Marketable securities costing to $15,000 were sold for $35,000 cash, resulting in a
$20,000 non-operating gain.
5. The company purchased plant assets for $100,000, making a $30,000 cash down payment
and issuing a $70,000 mortgage note payable for the balance of the purchase price.
 Auto Supply Corporation
Statement of Cash Flows through Indirect Method
As on December 31, 2001

Description Amount Amount

Cash flows from Operating Activities
Net Income 250,000
Add.
Depreciation Expense 60,000
Decrease in Inventory 5,000
Increase in A/c Payable 10,000
75,000
Sub-Total 325,000
Less.
Increase in A/c Receivable 10,000
Decrease in accrued Expense Payable 15,000
Gain on sale of Marketable Securities 20,000
Sub-Total 45,000
Cash flow provided by Operating Activities 280,000
Cash flows from Investing Activities
Proceeds from sale of Marketable Securities 35,000
Cash paid to acquire Plant Assets – W1 (30,000)
Cash flow provided by Investing Activities 5,000
Cash Flows from Financing Activities
Dividend paid (140,000)
Payment to reties bonds payable (150,000)
Cash flow provided by Financing Activities (290,000)
Net cash increase (decrease) during the year (5,000)
Cash and cash equivalent – opening balance 50,000
Cash and cash equivalent – ending balance ` 45,000

Working 1
Purchase of plant assets 100,000
Less. Portion financed through issuance of debt (70,000)
Cash paid to acquire plant assets 30,000
PROBLEM # 4: Preparing the statement of cash flows—indirect method.
Plywood Products Corporation of America accountants have assembled the following data for the year
ended December 31, 19X7
1997 1996
-------- -----------
Current accounts ( all result from operations)
Current assets:
Cash and cash equivalents..............................................................$85,700 $22,700
Accounts recievable......................................................................... 59,700 64,200
Inventories........................................................................................88,600 83,000
Prepaid expenses................................................................................5,300 4,100
Current liabilities:
Notes payable (for inventory purchases)........................................$22,600 $18,300
Accounts payable..............................................................................52,900 55,800
Income tax payable...........................................................................18,600 16,700
Accrued liablities.............................................................................. 25,500 27,200
Transaction data for 19X7:
Acquisition of long term Sale of equipment......................... $58,000
Investment..........................................$ 31,600 Amortization expense................... 5,300
Acquisition of land by issuing long Purchase of treasury stock........... 14,300
term notepayable..............................113,000 Loss sale of equipment.................. 11,700
Stock dividends.....................................31,800 Payment of cash dividends.............18,300
Collection of loan................................... 8,700 Issuance of long term note
Depreciation expense.......................... 26,800 payable to borrow cash…………….....34,400
Acquisition of building........................ 125,300 net income………………………………......67,100
Retirement of bondspayable Issuance of common stock
by issuing common stock.....65,000 for cash............................................41,200

REQUIRED:
Prepare Plywood products' statement of cash flows, using the indirect method to report operating
activities. Include an accompanying schedule of noncash investing and financing activities.
PROBLEM # 5: Prepare the 19X3 statement of cash flows for Robins Corporation, using the indirect
method to report cash flows from operating activities. In a separate schedule, report robins noncash
investing and financing activities.

December 31
_________________________
19X3 19X2
_________________________
Current assets:
Cash and cash equivalents $19,000 $3,000
Accounts receivable 22,000 23,000
Inventories 34,000 31,000
Prepaid expenses 1,000 3,000
Current liabilities:
Notes payable (for inventory purchase) $11,000 $7,000
Accounts payable 24,000 19,000
Accrued liabilities 7,000 9,000
Income tax payable 10,000 10,000

Transection data for 19X3:

Purchase of equipment $98,000
Payments of cash dividend 18,000
Net income 26,000
Issuance of common stock to retire bonds payable 13,000
Purchase of long term investment 8,000
Issuance of long term note payable to purchase patent 37,000
Depreciation expense 7,000
Issuance of long term note payable to borrow cash 7,000
Issuance of common stock for cash 19,000
Sale of building 74,000
Amortization expense 3,000
Purchase of treasury stock 5,000
Loss on sale of building 2,000
PROBLEM # 6: Prepare the statement of cash flows using -indirect method.
Accountants for Creve Coeur Manufacturing have assembled the following data for the year ended
December 31, 19X4: 19X4
19X3
-------------------------------------------
Current accounts (all result from operations):
Current assets:
Cash and cash equivalents................................................................$30,600 $34,800
Accounts recievable.......................................................................... 70,100 73,700
Inventories..........................................................................................90,600 96,500
Prepaid expenses..................................................................................3,200 2,100
Current liabilities:
Notes payable (for inventory purchases).........................................$36,300 $36,800
Accounts payable...............................................................................72,100 67,500
Income tax payable...............................................................................5,900 6,800
Accrued liablities............................................................................... 28,300 23,200

Transaction data for 19X4:

Acquisition of long term investment...................................................................................$ 44,800
Acquisition of building by issuing long term note payable..................................................162,000
Stock dividents.......................................................................................................................12,600
Collection of loan.................................................................................................................. 10,300
Depreciation expense............................................................................................................19,200
Acquisition of equipment.......................................................................................................69,000
Payment of long term debt by issuing common stock...........................................................89,400
Sale of long term investment.................................................................................................12,200
Amortization expense.............................................................................................................. 1,100
Payment of long term debt....................................................................................................47,800
Gain on sale of investment...................................................................................................... 3,500
Payment of cash dividends.....................................................................................................48,300
Issuance of long term debt to borrow cash........................................................................... 21,000
Net income.............................................................................................................................92,500
Issuance of preferred stock for cash......................................................................................36,200

REQUIRED:
Prepare statement of cash flows, using the indirect method to report operating activities. Include an
accompanying schedule of noncash Investing and financing activities.
PROBLEM # 7:
The comparative Balance Sheet of ABC Company for two years is as under;
Assets Dec. 31, 02 Dec. 31, 01
Cash Rs.87500 Rs.105000
Inventory 162500 175000
Prepaid rent 40000 45000
Accounts receivable 175000 160000
Plant assets 440000 415000
905000 900000
Liabilities and shareholder’s equities
Share capital Rs.605000 Rs.570000
Accounts payable 90000 100000
Salaries payable 15000 15000
Unearned Rent 15000 10000
Long term loan 60000 100000
Retained Earnings 120000 105000
905000 900000
Additional data:
Net income for the year 2002 Rs.90000. Cash dividend paid Rs.75000.
Required:
Prepare cash flow statement.
PROBLEM # 8: The balances of accounts of Multan Cement Co. Ltd. at end of 2002 and 2003 are as
follows;

Assets 2003 2002

Cash Rs.60000 Rs.100000
Accounts receivable 150000 175000
Inventory 325000 250000
Land 75000 -------
Plant assets 800000 625000
Machine 90000 100000
1500000 1250000

Accumulated Depreciation Rs.260000 Rs.200000

Accounts payable 155000 75000
Long term loan 25000 -----
Common Stock 1000000 875000
Retained Earnings 60000 100000
1500000 1250000

Additional data:
Company reported net loss for the year 2003 Rs.40000.

Required:
Prepare cash flow statement