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    Answer (A) Indirect Method

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    Kyriye Ongilav
    The Peso Company reported the following financial information for 2017: - Sales of P1,000,000 with a gross profit of P420,000 after costs of P580,000 - Operating expenses of P200,000 including depreciation of P80,000 and salaries of P120,000 - Profit before tax of P220,000 and profit after tax of P154,000 - Key changes in current assets and liabilities included increases in cash of P37,000 and inventories of P89,000, and decreases in accounts receivable of P50,000 and accounts payable of P46,000.

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    Answer (A) Indirect Method

    Uploaded by

    Kyriye Ongilav
    68 views2 pages
    The Peso Company reported the following financial information for 2017: - Sales of P1,000,000 with a gross profit of P420,000 after costs of P580,000 - Operating expenses of P200,000 including depreciation of P80,000 and salaries of P120,000 - Profit before tax of P220,000 and profit after tax of P154,000 - Key changes in current assets and liabilities included increases in cash of P37,000 and inventories of P89,000, and decreases in accounts receivable of P50,000 and accounts payable of P46,000.

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    Original Title

    Peso-Company

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    The Peso Company reported the following financial information for 2017: - Sales of P1,000,000 with a gross profit of P420,000 after costs of P580,000 - Operating expenses of P200,000 including depreciation of P80,000 and salaries of P120,000 - Profit before tax of P220,000 and profit after tax of P154,000 - Key changes in current assets and liabilities included increases in cash of P37,000 and inventories of P89,000, and decreases in accounts receivable of P50,000 and accounts payable of P46,000.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    68 views2 pages

    Answer (A) Indirect Method

    Uploaded by

    Kyriye Ongilav
    The Peso Company reported the following financial information for 2017: - Sales of P1,000,000 with a gross profit of P420,000 after costs of P580,000 - Operating expenses of P200,000 including depreciation of P80,000 and salaries of P120,000 - Profit before tax of P220,000 and profit after tax of P154,000 - Key changes in current assets and liabilities included increases in cash of P37,000 and inventories of P89,000, and decreases in accounts receivable of P50,000 and accounts payable of P46,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    The Peso Company reported the following condensed profit or loss for 2017:

    Sales P1,000,000
    Cost of goods sold 580,000
    Gross profit P 420,000
    Operating expenses
    Depreciation expense P 80,000
    Salaries expense 120,000 200,000
    Profit before income taxes P220,000
    Income tax expense 66,000
    Profit P154,000

    During 2017, the following changes occurred in the company’s current assets and current
    liabilities:
    Increase (Decrease)
    Cash P37,000
    Accounts receivable (50,000)
    Inventories 89,000
    Accounts payable(trade) (46,000)
    Salaries payable 24,000
    Income tax payable 12,000

    Required:
    Prepare the operating activities section of the Peso Company’s Statement of Cash Flows for the
    year 2017 using (a) indirect method and (b) direct method.

    Answer

    (a) Indirect method


    Cash flows from operating activities
    Profit before income tax P220,000
    Adjustments for
    Depreciation expense 80,000
    Operating income before working capital changes P300,000
    Decrease in accounts receivable 50,000
    Increase in inventories (89,000)
    Decrease in accounts payable (46,000)
    Increase in salaries payable 24,000
    Cash generated from operations P239,000
    Income tax paid (66,000 – 12,000) (54,000)
    Net cash from operating activities P185,000
    (b) Direct method
    Cash flows from operating
    activities
    Collections from customers P1,050,000
    Payments to trade creditors (715,000)
    Payments for salaries (96,000)
    Cash generated from operations P 239,000
    Income taxes paid 54,000
    Net cash from operating activities P185,000

    Computations:
    Collections: 1,000,000 + 50,000 = 1,050,000
    Payments to trade creditors: 580,000 + 89,000 + 46,000 = 715,000
    Salaries paid:120,000 - 24,000 = 96,000
    Income taxes paid: 66,000 - 12,000 = 54,000

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