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Problems Problem 1: True or False

The document contains problems related to classifying transactions and preparing statement of cash flows. It tests understanding of cash and cash equivalents, classification of transactions into operating, investing and financing activities, and preparation of statement of cash flows using direct and indirect methods. Multiple choice and true/false questions assess knowledge of statement of cash flows guidelines based on relevant accounting standards.

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jessamae gundan
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3K views

Problems Problem 1: True or False

The document contains problems related to classifying transactions and preparing statement of cash flows. It tests understanding of cash and cash equivalents, classification of transactions into operating, investing and financing activities, and preparation of statement of cash flows using direct and indirect methods. Multiple choice and true/false questions assess knowledge of statement of cash flows guidelines based on relevant accounting standards.

Uploaded by

jessamae gundan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PROBLEMS

PROBLEM 1: TRUE OR FALSE

FALSE 1. Cash flows are presented in the statement of cash flows into four activities.

TRUE 2. Non-financial institutions have the option of classifying interest income received as
either investing activities or operating activities.

FALSE 3. Cash flows relating to income and expenses are normally classified as investing
activities in the statement of cash flows.

TRUE 4. Only transactions that have affected cash and cash equivalents are included in the
statement of cash flows. Non-cash transactions are excluded and disclosed only.

FALSE 5. According to PAS 7, the indirect method of presenting cash flows relating to
operating activities shows each major class of gross cash receipts and gross cash
payments.

PROBLEM 2: MULTIPLE CHOICE

1. Entity A had the following balances at December 31, 20x1:

Cash in bank P 35,000

Cash in 90-day money market account 75,000

Treasury bill, purchased 11/1/xl, maturing 1/31/x2 350,000

Treasury bill, purchased 12/1/xl, maturing 3/31/x2 400,000

How much is the cash and cash equivalents to be reported in Entity A's December 31, 20x1
statement of financial position?

a. 110,000 c. 460,000

b. 385,000 d. 860,000

2. Which of the following cash flows is presented in the operating activities section of a
statement of cash flows?

a. cash receipts from issuing shares or other equity instruments and cash payments to
redeem them

b. cash receipts from issuing notes, loans, bonds and mortgage payable and other short-
term or long-term borrowings, and their repayments

c. cash receipts from the sale of goods, rendering of services, or other forms of
income

d. cash payments by a lessee for the reduction of the outstanding liability relating to a lease
3. In the statement of cash flows of a non-financial institution, interest expense paid is
presented under

a. operating activities.

b. investing activities.

c. financing activities

d. a or c

4. Which of the following is presented in the activities section of the statement of cash flows?

a. Purchase of a treasury bill three months before its maturity date.

b. Exchange differences from translating foreign currency denominated cash flows.

c. Acquisition of equipment through issuance of note payable.

d. Bank overdrafts that can be offset.

5. Entity A acquires equipment by paying a 10% down payment and issuing a note payable
for the balance. How should Entity A report the transaction in the statement of cash flows?

Down payment Note payable

a. Investing Activities None

b. Investing Activities Financing Activities

c. Financing Activities None

d. None None

PROBLEM 3: FOR CLASSROOM DISCUSSION

Cash and cash equivalents

1. Entity A had the following balances at December 31, 20x2;

Cash on hand P300,000


Cash in bank 700,000

Cash in 90-day money-market account 500,000

Treasury bill, purchased 12/1/x2, maturing 2/28/x3 1,600,000

Treasury bond, purchased 3/1/x2, maturing 2/28/x3 1,000,000


How much cash and cash equivalents is reported in Entity A's December 31, 20x2 statement
of financial position?

a. 3,800,000 c. 2,800,000

b. 1,100,000 d. 1,500,000

Presentation

2. Which of the following is included in the investing activities section of the statement of
cash flows?

a. Acquisition and sale of investments in held for trading securities.

b. Acquisition and sale of items of property, plant and equipment that are routinely
manufactured in the entity's ordinary course of business and are to be held for rentals and
reclassified to inventories when the assets cease to be rented and become held for sale.

c. Acquisition and sale of short-term investments in cash equivalents.

d. Cash inflow from repayment of loan.

3. Which of the following is included in the financing activities section of the statement of
cash flows?

a. cash payments for purchases of goods and services

b. cash receipts and cash payments in the acquisition and disposal of property, plant and
equipment, investment property, intangible assets and other noncurrent assets

c. loans to other parties and collections thereof (other than loans made by a financial
institution)

d. cash receipts from issuing shares or. other equity instruments and cash payments
to redeem them

4. This method of presenting cash flows from (used in) operating activities involves adjusting
accrual basis profit or loss for the effects of changes in operating assets and liabilities and
effects of non-cash items.

a. Direct method

c. Inverse method

b. Indirect method

d. Reverse method

5. Entity A declares cash dividends in 20x1 and pays the dividends in 20x2. How should
Entity A report the dividends paid in the statement of cash flows for 20x1 20x2

a. Operating activities None


b. Financing activities None

c. None Financing Activities

d. None Operating or Financing

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