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Statement of Cash Flows—Indirect Method The comparative balance sheet of Yellow Dog Enterprises Inc. at December...

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 $

Solutions

Expert Solution

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

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