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

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 $234,060 $218,980
Accounts receivable (net) 84,790 78,650
Inventories 239,360 232,860
Investments 0 90,220
Land 122,770 0
Equipment 264,090 205,880
Accumulated depreciation—equipment (61,830) (55,520)
Total assets $883,240 $771,070
Liabilities and Stockholders' Equity
Accounts payable $159,870 $151,900
Accrued expenses payable 15,900 20,050
Dividends payable 8,830 6,940
Common stock, $10 par 47,690 37,780
Paid-in capital: Excess of issue price over par-common stock 179,300 104,870
Retained earnings 471,650 449,530
Total liabilities and stockholders’ equity $883,240 $771,070

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 $81,200 cash.
  4. The common stock was issued for cash.
  5. There was a $58,360 credit to Retained Earnings for net income.
  6. There was a $36,240 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

STATEMENT OF CASH FLOWS:

Working Notes:

1. Depreciation

Depreciation = Accumulated depreciation as on Dec 31, 20Y9 - accumulated depreciation as on Dec 31, 20Y8

                        = $61,830 - $55,520

                        = $6,310

2. Loss on Sale of Investment

Loss on sale of Investment = Book Value of Investment as on Dec 31, 20Y8 - Sales Price of Investment

                                                   = $90,220 - $81,200

                                                   = $9,020

3. Purchase of Equipment

Purchase of Equipment = Book Value of equipment as on Dec 31, 20Y9 - Book value as on Dec 31, 20Y8

                                            = $264,090 - $205,880

                                            = $58,210

4. Purchase of Land

Purchase of Land = Book Value of land as on Dec 31, 20Y9 - Book value of land as on Dec 31, 20Y8

                                 = $122,770 - $0

                                 = $122,770

5. Cash paid for Dividends

Particulars 20Y9
Cash Dividends declared $36,240
Add: Dividend payable as on Dec 31, 20Y8 $6,940
Less: Dividend payable as on Dec 31, 20Y9 ($8,830)
Cash Paid for Dividends $34,350

6. Cash received from issuance of stock

Particulars $
Common Stock as on Dec 31, 20Y9 47,690
Add: Paid in capital excess of issue price 179,300
Less: Common Stock as on Dec 31, 20Y8 (37,780)
Less: Paid in capital excess of issue price (104,870)
Cash received from issuance of stock 84,340

All the best...

ekkarill92 answered 2 years ago
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