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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 $223,980 $207,870
Accounts receivable (net) 81,140 74,660
Inventories 229,040 221,030
Investments 0 85,640
Land 117,480 0
Equipment 252,710 195,430
Accumulated depreciation—equipment (59,160) (52,700)
Total assets $845,190 $731,930
Liabilities and Stockholders' Equity
Accounts payable $152,980 $144,190
Accrued expenses payable 15,210 19,030
Dividends payable 8,450 6,590
Common stock, $10 par 45,640 35,860
Paid-in capital: Excess of issue price over par-common stock 171,570 99,540
Retained earnings 451,340 426,720
Total liabilities and stockholders’ equity $845,190 $731,930

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $77,080 cash.

The common stock was issued for cash.

There was a $59,020 credit to Retained Earnings for net income.

There was a $34,400 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 out flows, 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
Cash Flow Statement (Indirect Method)
For the year ended December 31, 20Y9
Cash flows from operating activities
Net Income $    59,020
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expenses $        6,460 59160-52700
Loss on sale of investment $        8,560 85640-77080
Change in current operating assets and liabilities
Increase in Accounts Receiveble $      (6,480) 74660-81140
Increase in Inventory $      (8,010) 221030-229040
Increase in Accounts Payable $        8,790 152980-144190
Decrease in Accrued expense payable $      (3,820) 15210-19030
$      5,500
Cash Generated from Operations $    64,520
Cash flows from investing activities
Purchase of land $ (117,480)
Proceeds from sale of investment $      77,080
Purchase of Equipment $   (57,280) 195430-252710
Net cash used in investing activities $ (97,680)
Cash flows from financing activities
Proceeds from issue of common stock $      81,810 45640-35860+171570-99540
Payment of cash dividends $   (32,540) 8450-6590-34400
Net cash provided in financing activities $    49,270
Net increase in cash and cash equivalents $    16,110
Cash and cash equivalents at beginning of period $ 207,870
Cash and cash equivalents at end of period $ 223,980

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