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Session 4 - Solution To Exercises

Here are the key steps to prepare a cash flow statement: 1. Start with net income from the income statement. This includes both cash and non-cash transactions. 2. Add back any increase in liabilities or decrease in assets, since these represent cash generated but not part of net income. Examples include collection of receivables, increase in accounts payable. 3. Subtract any decrease in liabilities or increase in assets, since these represent cash used but not part of net income. Examples include increase in receivables through credit sales, payment of accounts payable. 4. Make adjustments for non-cash expenses like depreciation. 5. The resulting number is the net cash flow

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139 views8 pages

Session 4 - Solution To Exercises

Here are the key steps to prepare a cash flow statement: 1. Start with net income from the income statement. This includes both cash and non-cash transactions. 2. Add back any increase in liabilities or decrease in assets, since these represent cash generated but not part of net income. Examples include collection of receivables, increase in accounts payable. 3. Subtract any decrease in liabilities or increase in assets, since these represent cash used but not part of net income. Examples include increase in receivables through credit sales, payment of accounts payable. 4. Make adjustments for non-cash expenses like depreciation. 5. The resulting number is the net cash flow

Uploaded by

Christine Payopay
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The budgeted unit sales of Helene Company for the upcoming year are provided below:

Q1 12,000 units; Q2 14,000 units; Q3 11,000 units and Q4 10,000 units

The company’s variable selling and administrative expenses per unit are Php2.75. Fixed selling and admin
advertising expense of Php12,000 per quarter
Executive salary of Php40,000 per quarter
Depreciation of Php16,000 per quarter.
Insurance of Php6,000 in Q2 and another Php6,000 in Q4
Property taxes of Php16,000 will be paid in Q3

Prepare the selling and administrative budget per quarter

Q1 Q2 Q3 Q4
Volume 12,000.00 14,000.00 11,000.00 10,000.00
Variable unit cost 2.75 2.75 2.75 2.75
Total 33,000.00 38,500.00 30,250.00 27,500.00

Fixed costs
Advertising 12,000.00 12,000.00 12,000.00 12,000.00
Executive salary 40,000.00 40,000.00 40,000.00 40,000.00
Depreciation 16,000.00 16,000.00 16,000.00 16,000.00
Insurance 6,000.00 6,000.00
Property Taxes 16,000.00
Total Fixed Cost 68,000.00 74,000.00 84,000.00 74,000.00

Total cost 101,000.00 112,500.00 114,250.00 101,500.00


below:

5. Fixed selling and administrative expenses include:


Halifax Shoes has 30% of its sales in cash and the remainder on credit
in the month of sale, 25% is collected the month after the sale, and 5%
the sale. How much cash will be collected in August if sales are estima
in July, and Php90,000 in August?

Solution June July August


Sales 75,000 65,000.00 90,000.00

Credit sales (70% of sales) 52,500 45,500 63,000


Cash sales (30% of sales) 22,500 19,500 27,000

Collection from credit sales:


65% from current month's sale 34,125 29,575 40,950
25% from one month before 13,125 11,375
5% from two months before 2,625
Total 34,125 42,700 54,950
Add: cash sales 22,500 19,500 27,000
Total cash collection for the month 56,625 62,200 81,950
remainder on credit. Of the credit sales, 65% is collected
ter the sale, and 5% is collected the second month after
t if sales are estimated as Php75,000 in June, Php65,000
What is the amount of budgeted cash payments if purcha
budgeted for Php190,500 and the beginning and ending
accounts payable are Php21,000 and Php25,000, respec

In Php
Beg. A/P 21,000.00
Add: Purchases 190,500.00
Total A/P 211,500.00
Less: End, A/P 25,000.00
Total cash payments 186,500.00
yments if purchases are
ning and ending balances of
hp25,000, respectively?
Revenue
Less: COGS
Less: Expenses
Less: Taxes
Net Income xxxx Both cash and Non-cash transaction
Add: Decrease in Trade Receivable xxxx Collection of receivable
Less: Increase Trade Receivable xxxx Sales on credit
Add: Increase in trade payable xxxx Purchase of raw materials
Less: Decrease in trade payable xxxx Cash payment
Add: Increase in accrued expenses xxxx
Less: Decrease in accrued expenses xxxx
Less: Increase in prepaid expense xxxx Cash outflow
Add: Decrease in prepaid expense xxxx
Add: Increase Depreciation of machine xxxx
Cash Income/Cash flow xxxx Cash receipts and disbursement transactions
Dr. Cash Cr. Receivable
Dr. Receivable Cr. Revenue
Dr. Raw Materials Cr. A/P
Dr. A/P Cr. Cash
Dr. Expense Cr. Accrued expense
Dr. Accrued expense Cr. Cash
Dr. Prepaid expense Cr. Cash
Dr. Expense Cr. Prepaid expense
Dr. Depreciation expense Cr. Acc. Depreciation

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