Finman 108 (Quiz 4) ...

STRATEGIC FINANCIAL MANAGEMENT
PRELIM
QUIZ #4
(FINMAN 108)
MTH (10:30AM – 12:00NN)
SUBMITTED TO:
MR. MARIO E. TEMPORADA, MM
Instructor
SUBMITTED BY:
EZRA LYN C. VALENZUELA
STRATEGIC FINANCIAL MANAGEMENT
QUIZ 4
The comparative balance sheet of Sandy Corporation on December 31, 2016 and 2015 is
presented below.
Assets 2016 2015 Change

Increase/Decrease
Cash 120,000 150,000 (30,000)
Accounts receivable, net 370,000 210,000 160,000
Inventory 1,090,000 860,000 230,000
Prepaid insurance 80,000 90,000 (10,000)
Property, plant and equipment 4,300,000 3,620,000 680,000
Accumulated depreciation (840,000) (720,000) (120,000)
TOTAL ASSETS 5,120,000 4,210,000 910,000
Liabilities and Equity

Accounts payable 400,000 345,000 55,000
Salaries payable 70,000 40,000 30,000
Income tax payable 35,000 15,000 20,000
Accrued interest payable 5,000 -------------- 5,000
Bonds payable 600,000 -------------- 600,000
Ordinary share capital 3,050,000 3,050,000 -----------
Retained earnings 1,100,000 760,000 340,000
Treasury stocks (140,000) -------------- (140,000)
5,120,000 4,210,000 910,000
The income statement for the year ended December 31, 2016 shows the following:
Sales 4,450,000
Cost of sales:
Inventory 1/1 860,000
Purchases 2,630,000
Goods available for sale 3,490,000
Less: Inventory 12/31 1,090,000 (2,400,000)
Gross income 2,050,000
Operating expenses:
Salaries 640,000
Insurance 100,000
Rent 350,000
Depreciation 260,000
Bad debts write off 20,000 (1,370,000)
Operating income 680,000
Other income and finance cost:
Gain on sale of equipment 60,000
Interest expense (40,000) 20,000
Income before tax 700,000
LESS: Income tax (200,000)
Net income 500,000
Additional information:
1. Cash dividend of P 160,000 were declared and paid during the period.
2. Equipment costing P 190,000 and accumulated depreciation of P 140,000 was sold
for P 110,000 cash.
3. New equipment was purchased for cash
4. Bonds payable were issued for cash at face value of P 600,000
5. The treasury stock was purchased at cost of P 140,000.
Required: Prepare Statement of Cash Flows using Indirect Method.

Indirect Method
Sandy Corporation
Statement of Cash Flows
For the Year Ended December 31, 2016
Net Cash Flows from Operating Activities

Net Income P 500,000
Depreciation 260,000
Gain on Sale of Equipment (60,000)

Increase in Accounts Receivable – Net (160,000)
Increase in Inventory (230,000)
Decrease in Prepaid Insurance 10,000
Increase in Accounts Payable 55,000
Increase in Salaries Payable 30,000
Increase in Income Tax Payable 20,000
Increase in Accrued Interest Payable 5,000
Cash Flows Provided by Operating Activities P 430,000
Net Cash Flows from Investing Activities

Sale of Equipment 110,000
Purchase of New Equipment (870,000)
Cash Flows Used by Financing Activities (P 760,000)
Net Cash Flows from Financing Activities

Issuance of Bonds Payable for Cash 600,000
Payment of Dividends (160,000)
Purchase of Treasury Stock (140,000)
Cash Flows Provided by Financing Activities P 300,000
Decrease in Cash and Cash Equivalents (P 30,000)

Add: Cash and Cash Equivalents, December 31, 2015 150,000
Cash and Cash Equivalents, December 31, 2016 P 120,000
Direct Method
Sandy Company
Statement of Cash Flows
Year Ended December 31, 2016
Cash Flows from Operating Activities

Collection from customers P 4,270,000
Payment to Creditors (2,575,000)
Salaries Paid (610,000)
Insurance Paid (90,000)
Rent Paid (350,000)
Cash generated from operations 645,000
Interest Paid (35,000)
Income Tax Paid (180,000)
Cash Flows provided by Operating Activities P 430,000
Cash Flows from Investing Activities

Sale of Equipment 110,000
Purchase of New Equipment (870,000)
Cash Flows Used by Financing Activities (P 760,000)
Cash Flows from Financing Activities

Issuance of Bonds Payable for Cash 600,000
Payment of Dividends (160,000)
Purchase of Treasury Stock (140,000)
Cash Flows Provided by Financing Activities P 300,000
Decrease in Cash and Cash Equivalents (P 30,000)

Add: Cash and Cash Equivalents, December 31, 2015 150,000
Cash and Cash Equivalents, December 31, 2016 P 120,000
Supporting Notes:
1. Accounts Receivable – Jan. 1 P 210,000
Add: Sales 4,450,000
Total 4,660,000
Less: Accounts Receivable – Dec. 31 370,000
Bad Debts Write Off 20,000
Collection from Customers P 4,270,000
2. Accounts Payable – Jan. 1 P 345,000

Add: Purchases 2,630,000
Total 2,975,000
Less: Accounts Payable – Dec. 31 400,000
Payment to merchandise creditors P 2,575,000
3. Salaries Expense P 640,000

Add: Salaries Payable – Jan. 1 40,000
Total 680,000
Less: Salaries Payable – Dec. 31 70,000
Payment for Salaries P 610,000
4. Insurance P 100,000
Add: Prepaid Insurance – Dec. 31 80,000
Total 180,000
Less: Prepaid Insurance – Jan. 1 90,000
Payment for Insurance P 90,000
5. Rent Paid P 350,000
6. Interest Expense P 40,000

Less: Interest Payable – Dec. 31 (5,000)
Interest Paid P 35,000
7. Income Tax P 200,000

Add: Income Tax Payable – Jan. 1 15,000
Total 215,000
Less: Income Tax Payable – Dec. 31 (35,000)
Income Tax Paid P 180,000

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STRATEGIC FINANCIAL MANAGEMENT

MTH (10:30AM – 12:00NN)

Assets 2016 2015 Change

Liabilities and Equity

Required: Prepare Statement of Cash Flows using Indirect Method.

Net Cash Flows from Operating Activities

Gain on Sale of Equipment (60,000)

Net Cash Flows from Investing Activities

Net Cash Flows from Financing Activities

Decrease in Cash and Cash Equivalents (P 30,000)

Cash Flows from Operating Activities

Cash Flows from Investing Activities

Cash Flows from Financing Activities

Decrease in Cash and Cash Equivalents (P 30,000)

2. Accounts Payable – Jan. 1 P 345,000

3. Salaries Expense P 640,000

5. Rent Paid P 350,000

6. Interest Expense P 40,000

7. Income Tax P 200,000

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