Cash Flow Statement: Practical Problems and Solutions
These problems will help students clarify key concepts about cash flow statements and to ready themselves for their exams and interviews.
Summarized Cash Book
|To balance b/d||150,000||By repayment of bank loan||450,000|
|To sale of machinery||1,350,000||By purchase of Machinery||1,200,000|
|To receipts from debtors||9,000,000||By payment to creditors||7,800,000|
|To issue of shares||3,000,000||By dividends||300,000|
|By wages and salaries||600,000|
|By rent, rates, and tax||300,000|
|By income tax||150,000|
|By balance c/d||2,700,000|
Calculation of Net Cash Flow from Operating Activities (Direct Method)
|Cash received from debtors||9,000,000|
|Other cash receipts||–|
|Less: Cash paid to creditors||7,800,000|
|Cash paid to employees (wages and salaries)||600,000|
|Other cash expenses (rent, rates and tax)||300,000||8,700,000|
|Cash generated from operation||300,000|
|Less: Income tax paid||150,000|
|Net cash flow from operating activities||150,000|
From the following profit and loss account of Samarth Ltd., calculate net cash flows from operating activities.
|To depreciation||40,800||By gross profit||394,400|
|To rent||72,000||By profit on sale of building||53,600|
|To administrative expenses||48,000||By profit on sale of furniture||50,400|
|To salaries||64,000||By income tax refund||18,400|
|To loss on sale of plant||12,800|
|To provision for bad debts||64,000|
|To goodwill written off||34,400|
|To loss on sale of machinery||19,600|
|To provision for tax||24,000|
|To proposed dividend||48,000|
|To net profit||89,200|
Calculation of Net Cash Flow from Operating Activities
From the following information extracted from the book of Max Ltd. for the year 2019-20, calculate net cash flow from investing activities.
Additional information is given as follows:
- Depreciation charged on furniture during the year was $10,000
- Depreciation on machinery charged during the year was $25,000
- Machinery, the book value of which was $80,000, sold for $75,000
- Land was sold at a profit of $90,000
Note: $190,000 indicates cash outflows are more than inflows.
You received the following information from Hema Enterprises Pvt. Ltd. Calculate the net cash flow from investing activities.
Information relating to assets sold during the year 2020 is given as follows:
- Furniture costing $100,000 (accumulated depreciation $20,000) was sold for $70,000
- Machinery costing $100,000 (accumulated depreciation $30,000) was sold for $80,000
Calculation of Net Cash Flow From Investing Activities
Note: Cash outflows are more than cash inflows ($410,000).
Accumulated Depreciation Account (Furniture)
Accumulated Depreciation (Machinery)
From the following information acquired from Tarapoore Ltd., calculate net cash flows from financing activities for the year 2019-20.
Note: Interest on debentures paid during the year was $30,000 and on bank loan $40,000.
Calculation of Net Cash Flows from Financing Activities
Base Ltd. provides the following information to you. Calculate net cash flows from financing activities for the year 2019-20.
Further information is given as follows:
- The company issued 5,000 bonus shares during 2019-20 to shareholders at face value
- Interest on debentures paid, in total, during the year was $60,000
- Interest on bank loan paid during the year was $25,000
- Dividends paid during the year amounted to $120,000
Cash Flows from Financing Activities