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Statement of Cash Flows—Indirect Method The comparative balance sheet of Merrick Equipment Co. for December 31,...

Statement of Cash Flows—Indirect Method

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 $236,660 $218,630
Accounts receivable (net) 85,730 78,520
Inventories 242,020 232,490
Investments 0 90,070
Land 124,140 0
Equipment 267,020 205,540
Accumulated depreciation—equipment (62,510) (55,430)
Total assets $893,060 $769,820
Liabilities and Stockholders' Equity
Accounts payable $161,640 $151,650
Accrued expenses payable 16,080 20,020
Dividends payable 8,930 6,930
Common stock, $10 par 48,230 37,720
Paid-in capital: Excess of issue price over par-common stock 181,290 104,700
Retained earnings 476,890 448,800
Total liabilities and stockholders’ equity $893,060 $769,820

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 $81,060 cash.
  4. The common stock was issued for cash.
  5. There was a $64,270 credit to Retained Earnings for net income.
  6. There was a $36,180 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.

Solutions

Expert Solution

Cash flows from operating activities:
Net income 64270
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation 7080
Loss on sale of investments 9010
Changes in current operating assets and liabilities:
Increase in accounts receivable -7210
Increase in inventories -9530
Increase in accounts payable 9990
Increase in accrued expenses payable -3940
Net cash flow from operating activities 69670
Cash flows from investing activities:
Cash received from sale of investments 81060
Cash paid for purchase of land -124140
Cash paid for purchase of equipment -61480
Net cash flow used for investing activities -104560
Cash flows from financing activities:
Cash from sale of common stock 87100
Cash paid for dividends -34180
Net cash flow from financing activities 52920
Increase in cash 18030
Cash at the beginning of the year 218630
Cash at the end of the year 236660

ekkarill92 answered 6 months ago
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