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In: Accounting

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as...

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows:

Dec. 31, 20Y9 Dec. 31, 20Y8
Assets
Cash $241,860 $226,540
Accounts receivable (net) 87,620 81,360
Inventories 247,340 240,900
Investments 0 93,330
Land 126,860 0
Equipment 272,890 212,980
Accumulated depreciation—equipment (63,890) (57,430)
Total assets $912,680 $797,680
Liabilities and Stockholders' Equity
Accounts payable $165,200 $157,140
Accrued expenses payable 16,430 20,740
Dividends payable 9,130 7,180
Common stock, $10 par 49,280 39,090
Paid-in capital: Excess of issue price over par-common stock 185,270 108,480
Retained earnings 487,370 465,050
Total liabilities and stockholders’ equity $912,680 $797,680

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

  1. Equipment and land were acquired for cash.
  2. There were no disposals of equipment during the year.
  3. The investments were sold for $84,000 cash.
  4. The common stock was issued for cash.
  5. There was a $59,810 credit to Retained Earnings for net income.
  6. There was a $37,490 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Merrick Equipment Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities $
Cash flows from (used for) investing activities:
$
Net cash flow used for investing activities
Cash flows from (used for) financing activities:
Net cash flow from financing activities
$
Cash at the beginning of the year
Cash at the end of the year $

Solutions

Expert Solution

Answer to Question:

MERRICK EQUIPMENT COMPANY
Statement of Cash Flows
For the year ended Dec 31,20Y9
Particulars Amount($) Amount($) Amount($)
Cash Flows from operating activities
Net Income 59810
Adjustment to Reconcile net Income to Net Cash
flow from operating activities
Depreciation 6460
Loss on sale of Investment (93,330-84,000) 9330
Changes in Current Operating Assets & Liabilities:
Increase in Account Receivable (6,260)
Increase in Inventories (6,440)
Increase in Account Payable 8060
Increase in Accrued Expenses Payable (4,310)
a)Net Cash Flow from Operating Activities 66650
Cash flow from Investing activities:
Cash received from sale of Investments 84000
Less: Cash paid for purchase of land (126,860)
         Cash paid for purchase of equipment (59,910) (186,770)
b)Net Cash Flow used for Investing Activities (102,770)
Cash flow from Financing activities:
Cash received from sale of Common Stock*** 86980
Less: Cash paid for dividends** (35,540)
c)Net Cash Flows from financing activities 51,440
(a+b+c)Increase in Cash 15,320
d)Cash at the beginning of the year 226540
(a+b+c+d)Cash at the end of the year 241,860
** $37490+7180-9130 =$35540
***($1,85,270+49,280-1,08,480-39,090)= $86980

ekkarill92 answered 1 year ago
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