Problem A.

A comparative balance sheet for Bell Industries is given below:

Bell Industries
Comparative Balance Sheet
December 31, 2025 and 2024

Assets 2025 2024

Cash ........................................ P 40,000 P 10,000
Accounts receivable ......................... 100,000 92,000
Merchandise inventory ....................... 30,000 43,000
Land, buildings, and equipment .............. 325,000 200,000
Accumulated depreciation--buildings and
equipment ................................. (75,000) (50,000)
Total assets ............................ P420,000 P295,000

Liabilities and Stockholders' Equity

Accounts payable ............................ P 65,000 P 75,000
Common stock (P25 par) ...................... 275,000 200,000
Paid-in capital in excess of par ............ 50,000 0
Retained earnings ........................... 30,000 20,000
Total liabilities and stockholders' equity P420,000 P295,000

Additional data from the company's records were:

(a) On July 1, 2025, exchanged 3,000 shares of common stock for equipment.
(b) On December 31, 2025, paid cash dividends of P40,000 and income taxes
of P10,000.

Prepare a cash flow statement for Bell Industries for the year ended December 31, 2025, using
the indirect method. Include any necessary supplemental disclosures.

Problem B

The following is a comparative balance sheet of Covey Corporation for December 31, 2025 and
2024:

December 31
2025 2024
Cash and cash equivalents ............ P 250,000  P 220,000
Accounts receivable .................. 327,600 356,000
Inventories .......................... 822,000 780,000
Available-for-sale securities ........ 0 200,000
Equipment ............................ 2,400,000 2,040,000
Accumulated depreciation ............. (700,000) (760,000)
P3,099,600  P2,836,000

Accounts payable ..................... P 359,000  P 281,000

Bonds payable, due 2008 .............. 400,000
Common stock, P20 par ................ 1,800,000 1,600,000
 Paid-in capital in excess of par ..... 280,000 200,000
Retained earnings .................... 660,600  355,000
P3,099,600  P2,836,000

Additional information:
(a) Net income for 2025, P545,600.
(b) Depreciation reported on income statement, P140,000.
(c) Fully depreciated equipment, no salvage value, was scrapped. Equipment
was purchased for P560,000.
(d) Bonds of P400,000 were retired at their face value.
(e) 10,000 shares of common stock were issued for cash at P28 per share.
(f) Cash dividends declared and paid, P240,000.
(g) Available-for-sale securities with a book value of P200,000 were sold for
P300,000.

Prepare a statement of cash flows for Covey Corporation for 2025, using the indirect method.
(20 points) Compute the cash flow to net income and cash flow adequacy ratios. Analyze the
ratios. Have at least 5 sentences for your analysis. (10 points)

FOR MARCH 17, 2020:

A. Answer Problem B above. Covey Corporation

B. Answer and reflect on the questions below.

1. Why do you think the standards require preparers to submit the Statement of Cash Flow
as part of the Financial Statements? State its importance in no less than 5 sentences.
5points)
2. Apply the knowledge of the preparation of Statement of Cash Flows in your
household/family expenditures. Provide a brief description of your family, how many
members are there, number of children, what grade level and other general information
that could help in assessing your Statement of Cash Flows. Prepare a Proforma
Statement of Cash Flows identifying the common cash expenditures in your home and
properly classifying them whether operating, investing and financing activity. Please
provide amounts, estimation is acceptable. (10 points) Please do provide headings.
3. Analyze your prepared Family Statement of Cash Flows. Provide at least three
recommendations.(5 points)