Question

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		$267,860		$251,190
Accounts receivable (net)		97,040		90,210
Inventories		273,940		267,110
Investments		0		103,480
Land		140,500		0
Equipment		302,230		236,150
Accumulated depreciation—equipment		(70,760)		(63,680)
	Total assets	$1,010,810		$884,460
Liabilities and Stockholders' Equity
Accounts payable		$182,960		$174,240
Accrued expenses payable		18,190		23,000
Dividends payable		10,110		7,960
Common stock, $10 par		54,580		43,340
Paid-in capital: Excess of issue price over par-common stock		205,190		120,290
Retained earnings		539,780		515,630
	Total liabilities and stockholders’ equity	$1,010,810		$884,460

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 $93,130 cash.
4. The common stock was issued for cash.
5. There was a $65,720 credit to Retained Earnings for net income.
6. There was a $41,570 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		$

Answer 1

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Workings- Indirect Method	Amount $
Depreciation expense
Closing- Accumulated depreciation	70,760.00
Less: Opening- Accumulated depreciation	63,680.00
Depreciation expense	7,080.00
Loss on sale of investment
Opening value	103,480.00
Less: sale value	93,130.00
Depreciation expense	10,350.00
Increase in Accounts receivable
Closing Balance	97,040.00
Less: Opening Balance	90,210.00
Increase in Accounts receivable	6,830.00
Increase in Inventory
Closing Balance	273,940.00
Less: Opening Balance	267,110.00
Increase in Inventory	6,830.00
Increase in Accounts Payable
Closing Balance	182,960.00
Less: Opening Balance	174,240.00
Increase in Accounts Payable	8,720.00
Decrease in Accrued expenses payable
Closing Balance	18,190.00
Less: Opening Balance	23,000.00
Decrease in Accrued expenses payable	(4,810.00)
Equipment purchased
Closing Balance	302,230.00
Less: Opening Balance	236,150.00
Equipment purchased	66,080.00
Dividend paid
Closing- Dividend payable	10,110.00
Add: Dividend declared	41,570.00
Less: Opening- Dividend payable	7,960.00
Dividend paid	43,720.00
Common Stock issued
Closing balance- Common stock	54,580.00
Add: Closing balance- Paid-in capital: Excess of issue price over par	205,190.00
Less: Opening balance- Common stock	43,340.00
Less: Opening balance- Paid-in capital: Excess of issue price over par	120,290.00
Common Stock issued	100,440.00

Merrick Equipment
Cashflow statement	Amount $	Amount $
Particulars
Net Income		65,720.00
Adjustment to reconcile Net Income to Net Cash
Add:
Deprecation Expense	7,080.00
Loss on sale of investment	10,350.00	17,430.00
Cash flow from Operations		83,150.00
Changes in Current Assets/Current Liabilities
Increase in Accounts receivable	(6,830.00)
Increase in Inventory	(6,830.00)
Increase in Accounts Payable	8,720.00
Decrease in Accrued expenses payable	(4,810.00)	(9,750.00)
Net cash provided by operating activities		73,400.00
Cash flow from investing activities
Investments sold	93,130.00
Equipment purchased	(66,080.00)
Land purchased	(140,500.00)
Net cash used by investing activities		(113,450.00)
Cash flow from financing activities
Dividend paid	(43,720.00)
Common Stock issued	100,440.00
Net cash provided by financing activities		56,720.00
Net Increase/(Decrease) in cash		16,670.00
Cash Balance, beginning		251,190.00
Cash Balance, ending		267,860.00