7. In preparing a statement of cash flows, the following figures are considered in the calculation of cash flows from operating activities (using the indirect method): Depreciation Expense P980,000 40,000 Gain on Sale of Non-Current Assets Increase in Inventories 130,000 Decrease in Receivables 100,000 Increase in Payables 80,000 a. What will be the net effect of these items? Addition to operating profit P890,000 b. Subtraction from operating profit P890,000 c. Addition to operating profit P1,070,000 d. Addition to operating profit P990,000 8. Part of a corporation's draft statement of cash flows is shown below: Profit before Tax P1,864,000 Depreciation Expense (216,000) Proceeds of Sale of Non-Current Assets 36,000 Increase in Inventory (33,000) Increase in Accounts Payable 44,000 The following criticisms of the above extract have been made: 1. Depreciation expense should have been added not deducted. 2. Increase in inventory should have been added not deducted. 3. Increase in accounts payable should have been deducted not added. 4. Proceeds of sale of non-current assets should not appear in this section of the statement of cash flows. a. Which of these criticisms are valid? 2 and 3 only b. 1 and 4 only c. 1 and 3 only d. 2 and 4 only 9. In preparing a statement of cash flows, which of the following items could form part of cash flows from financing activities? 1. Proceeds of sale of premises 2. Dividends received 3. Bonus issue of shares 4. Settlement of notes payable