Question

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		$48,740		$59,730
Accounts receivable (net)		74,900		80,520
Inventories		106,990		99,810
Prepaid expenses		4,360		3,020
Equipment		217,950		178,810
Accumulated depreciation-equipment		(56,670)		(43,850)
	Total assets	$396,270		$378,040
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$83,220		$79,010
Mortgage note payable		0		113,410
Common stock, $1 par		13,000		8,000
Paid-in capital in excess of par-common stock		182,000		107,000
Retained earnings		118,050		70,620
	Total liabilities and stockholders’ equity	$396,270		$378,040

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, $121,420.
2. Depreciation reported on the income statement, $27,660.
3. Equipment was purchased at a cost of $53,980 and fully depreciated equipment costing $14,840 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. 5,000 shares of common stock were issued at $16 for cash.
6. Cash dividends declared and paid, $73,990.

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.

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from (used for) 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 balance, January 1, 20Y8
Cash balance, December 31, 20Y8		$

Answer 1

Solution

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities:
Net income	$      121,420.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$       27,660.00
Changes in current operating assets and liabilities:
Decrease in accounts receivables	$         5,620.00
Increase in Inventory	$        (7,180.00)
Increase in prepaid expense	$           (1,340.00)
Increase in accounts payable	$         4,210.00
Net cash flow from operating activities		$      150,390.00
Cash flows from investing activities:
Purchase of Equipment	$      (53,980.00)
Net cash flow used for investing activities		$      (53,980.00)
Cash flows from financing activities:
Issue of common stock	$       80,000.00
Repayment of mortgage	$     (113,410.00)
Payment of Dividend	$      (73,990.00)
Net cash flow used for financing activities		$     (107,400.00)
Change in cash during year		$      (10,990.00)
Cash balance, January 1, 20Y8		$       59,730.00
Cash balance, December 31, 20Y8		$       48,740.00