Question

1. Statement of Cash Flows—A method of reporting the cash flows from operating activities as the net income from operations adjusted for all deferrals of past cash receipts and payments and all accruals of expected future cash receipts and payments.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		$74,970		$91,680
   Accounts receivable (net)		115,190		123,590
   Merchandise inventory		164,570		153,180
   Prepaid expenses		6,700		4,640
   Equipment		335,220		274,450
   Accumulated depreciation-equipment		(87,160)		(67,310)
   	Total assets	$609,490		$580,230
   Liabilities and Stockholders' Equity
   Accounts payable (merchandise creditors)		$127,990		$121,270
   Mortgage note payable		0		174,070
   Common stock, $1 par		19,000		12,000
   Paid-in capital: Excess of issue price over par-common stock		283,000		164,000
   Retained earnings		179,500		108,890
   	Total liabilities and stockholders’ equity	$609,490		$580,230

   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, $180,760.
   2. Depreciation reported on the income statement, $42,630.
   3. Equipment was purchased at a cost of $83,550, and fully depreciated equipment costing $22,780 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, $110,150.

   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:
   Net income Common stock Depreciation expense Inventory Net income Prepaid expenses Retained earnings	$ 180,760
   Adjustments to reconcile net income to net cash flow from operating activities:
   Depreciation expense Cash used for dividends Decrease in accounts receivable Depreciation expense Increase in accounts receivable Net income Retained earnings	42,630
   Changes in current operating assets and liabilities:
   Decrease in accounts receivable Decrease in accounts payable Decrease in accounts receivable Decrease in inventory Depreciation expense Increase in accounts receivable
   Decrease in accounts payable Decrease in merchandise inventory Decrease in prepaid expenses Depreciation expense Increase in accounts receivable Increase in merchandise inventory
   Decrease in accounts payable Decrease in inventory Decrease in prepaid expenses Increase in prepaid expenses
   Decrease in accounts payable Decrease in prepaid expenses Depreciation expense Increase in accounts payable Net income Retained earnings
   Net cash flow from operating activities		$
   Cash flows from (used for) investing activities:
   Cash paid for common stock Cash used for equipment Cash used for dividends Cash paid for merchandise inventory Cash paid for prepaid expenses Cash paid to retire mortgage note	$
   Net cash flow used for investing activities
   Cash flows from (used for) financing activities:
   Cash received from customers Cash received from depreciation Cash received from dividends Cash received from net income Cash received from retained earnings Cash from sale of common stock	$
   Cash paid for accounts payable Cash paid for common stock Cash used for dividends Cash used for equipment Cash paid for inventory Cash paid for prepaid expenses
   Cash paid for accounts payable Cash paid for accumulated depreciation Cash paid for common stock Cash paid for depreciation Cash paid for inventories Cash used to retire mortgage note payable
   Net cash flow used for financing activities
   Decrease in cash Increase in cash		$
   Cash at the beginning of the year
   Cash at the end of the year		$

Answer 1