Question

Statement of Cash Flows—Indirect Method

1. 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		$74,580		$91,010
   Accounts receivable (net)		114,600		122,690
   Merchandise inventory		163,720		152,080
   Prepaid expenses		6,670		4,610
   Equipment		333,490		272,460
   Accumulated depreciation-equipment		(86,710)		(66,820)
   	Total assets	$606,350		$576,030
   Liabilities and Stockholders' Equity
   Accounts payable (merchandise creditors)		$127,330		$120,390
   Mortgage note payable		0		172,810
   Common stock, $1 par		19,000		12,000
   Paid-in capital: Excess of issue price over par-common stock		281,000		162,000
   Retained earnings		179,020		108,830
   	Total liabilities and stockholders’ equity	$606,350		$576,030

   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, $179,690.
   2. Depreciation reported on the income statement, $42,500.
   3. Equipment was purchased at a cost of $83,640, and fully depreciated equipment costing $22,610 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 $18 for cash.
   6. Cash dividends declared and paid, $109,500.

   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 For the Year Ended December 31, 20Y8
Cash Flow from Operating activities:
Net Income	$ 179,690
Adjustments to convert Net Income to Net cash flow from operating activities:
Depreciation	$ 42,500
Changes in current operating assets and liabilities:
Decrease in account receivable           ( $ 122,690 (-) $ 114,600 )	$ 8,090
Increase in Inventory      ( $ 152,080 (-) $ 163,720)	($11,640)
Increase in accounts payable        ( $ 127,330 (-) $ 120,390)	$ 6,940
Increase in prepaid expenses       ( $ 4,610 (-) $ 6,670)	($2,060)
Net cash flow from operating activities		$ 223,520
Cash Flow from Investing activities:
Cash paid for equipment	($ 83,640)
Net cash flow used for investing activities		($ 83,640)
Cash Flow from financing activities:
Cash received from sale of common stock          ( 7,000 Shares x $ 18)	$ 126,000
Cash paid to retire mortgage note payable	($172,810)
Cash paid for dividends	($109,500)
Net Cash flow used for financing activities		($156,310)
Change in cash		($16,430)
Cash at the beginning of the year		$ 91,010
Cash at the end of the year		$ 74,580