Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:

		Dec. 31, 20Y8		Dec. 31, 20Y7
Assets
Cash		$74,100		$90,800
Accounts receivable (net)		113,860		122,410
Merchandise inventory		162,630		151,730
Prepaid expenses		6,630		4,600
Equipment		331,330		271,830
Accumulated depreciation-equipment		(86,140)		(66,670)
	Total assets	$602,410		$574,700
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$126,510		$120,110
Mortgage note payable		0		172,410
Common stock, $1 par		19,000		12,000
Paid-in capital: Excess of issue price over par-common stock		295,000		162,000
Retained earnings		161,900		108,180
	Total liabilities and stockholders’ equity	$602,410		$574,700

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:

1. Net income, $137,520.
2. Depreciation reported on the income statement, $42,030.
3. Equipment was purchased at a cost of $82,060, and fully depreciated equipment costing $22,560 was discarded, with no salvage realized.
4. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
5. 7,000 shares of common stock were issued at $20 for cash.
6. Cash dividends declared and paid, $83,800.

Required:

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

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
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 used for financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Yellow Dog Enterprises Inc.
Statement of Cash Flows
	Cash flows from operating activities:
	Net income		$   1,37,520.00
	Adjustments to reconcile net income to net cash flow from operating activities:
	Depreciation	$       42,030.00
	Changes in current operating assets and liabilities:
	Decrease in accounts receivables	$         8,550.00
	Increase in inventory	$     (10,900.00)
	Increase in prepaid expenses	$       (2,030.00)
	Increase in accounts payables	$         6,400.00
			$       44,050.00
	Net cash flow from operating activities		$   1,81,570.00
	Cash flows from investing activities:
	Cash paid for Equipment	$     (82,060.00)
	Net cash flow used for investing activities		$     (82,060.00)
	Cash flows from financing activities:
	Cash paid for dividends	$     (83,800.00)
	Cash received from sale of common stock	$   1,40,000.00
	Cash paid to retire mortgage note payable	$ (1,72,410.00)
	Net cash flow used for financing activities		$ (1,16,210.00)
	Change in cash		$     (16,700.00)
	Cash at the beginning of the year		$       90,800.00
	Cash at the end of the year		$       74,100.00