Cash Flow Statement: Practical Problems and Solutions

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on August 27, 2021

These problems will help students clarify key concepts about cash flow statements and to ready themselves for their exams and interviews.

Problem 1

From the summarized cash book of Zenith Ltd. shown below, calculate net cash flow from operating activities.

Zenith Ltd. 
Summarized Cash Book

Particulars $ Particulars $
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
Total 13,500,000 Total 13,500,000

Solution

Zenith Ltd.
Calculation of Net Cash Flow from Operating Activities (Direct Method)

Particulars $ $
Cash received from debtors 9,000,000
Other cash receipts
9,000,000
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

Problem 2

From the following profit and loss account of Samarth Ltd., calculate net cash flows from operating activities.

Particulars $ Particulars $
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
Total 516,800 Total 516,800

Solution

Samarth Ltd.
Calculation of Net Cash Flow from Operating Activities

Samarth Ltd. Net Cash Flow Data

Problem 3

From the following information extracted from the book of Max Ltd. for the year 2019-20, calculate net cash flow from investing activities.
Max Ltd. Cost Data
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

Solution

Calculation for Problem 3
Note: $190,000 indicates cash outflows are more than inflows.

Working Notes

Furniture Account

Furniture Account Problem 3

Machinery Account

Machinery Account Problem 3

Building Account

Building Account Problem 3

Land Account

Land Account Problem 3

Problem 4

You received the following information from Hema Enterprises Pvt. Ltd. Calculate the net cash flow from investing activities.
Hema Enterprises Pvt. Ltd. Cost Data
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

Solution

Calculation of Net Cash Flow From Investing Activities

Calculation for Problem 4
Note: Cash outflows are more than cash inflows ($410,000).

Working Notes

Accumulated Depreciation Account (Furniture)

Accumulated Depreciation Account (Furniture) Problem 4

Furniture Account

Furniture Account Problem 4

Accumulated Depreciation (Machinery)

Accumulated Depreciation (Machinery) Problem 4

Machinery Account

Machinery Account Problem 4

Problem 5

From the following information acquired from Tarapoore Ltd., calculate net cash flows from financing activities for the year 2019-20.
Tarapoore Ltd. Cost Data
Note: Interest on debentures paid during the year was $30,000 and on bank loan $40,000.

Solution

Calculation of Net Cash Flows from Financing Activities

Calculation for Problem 5

Problem 6

Base Ltd. provides the following information to you. Calculate net cash flows from financing activities for the year 2019-20.Base Ltd. Cost Data
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

Solution

Base Ltd.
Cash Flows from Financing Activities

Calculation for Problem 6

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