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

  1. 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 $300,740 $278,470
    Accounts receivable (net) 108,950 100,010
    Inventories 307,540 296,120
    Investments 0 114,720
    Land 157,750 0
    Equipment 339,320 261,800
    Accumulated depreciation—equipment (79,440) (70,600)
    Total assets $1,134,860 $980,520
    Liabilities and Stockholders' Equity
    Accounts payable $205,410 $193,160
    Accrued expenses payable 20,430 25,490
    Dividends payable 11,350 8,820
    Common stock, $10 par 61,280 48,050
    Paid-in capital: Excess of issue price over par-common stock 230,380 133,350
    Retained earnings 606,010 571,650
    Total liabilities and stockholders’ equity $1,134,860 $980,520

    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 $103,250 cash.
    4. The common stock was issued for cash.
    5. There was a $80,440 credit to Retained Earnings for net income.
    6. There was a $46,080 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

Merrick Equipment Co.
Statement of Cash Flows
Year Ended December 31, 20Y9
Cash flows from operating activities:
Net Income      80,440
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense       8,840
Loss on sale of investment      11,470
Changes in current operating assets and liabilities:
Increase in accounts receivable (net)      (8,940)
Increase in inventories    (11,420)
Increase in accounts payable      12,250
Decrease in accrued expenses payable      (5,060)
Net cash flow from operating activities       87,580
Cash flows from investing activities:
Purchase of equipment    (77,520)
Purchase of land (157,750)
Sale of investment    103,250
Net cash flow used for investing activities (132,020)
Cash flows from financing activities:
Issuance of common stock    110,260
Payment of cash dividends    (43,550)
Net cash flow from financing activities         66,710
Net increase (decrease) in cash       22,270
Cash at the beginning of the year     278,470
Cash at the end of the year     300,740

ekkarill92 answered 2 years ago
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