Question

16-3 16-01

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		$260,160		$240,610
Accounts receivable (net)		94,250		86,420
Inventories		266,040		255,860
Investments		0		99,130
Land		136,460		0
Equipment		293,540		226,210
Accumulated depreciation—equipment		(68,720)		(61,000)
	Total assets	$981,730		$847,230
Liabilities and Stockholders' Equity
Accounts payable		$177,690		$166,900
Accrued expenses payable		17,670		22,030
Dividends payable		9,820		7,630
Common stock, $10 par		53,010		41,510
Paid-in capital: Excess of issue price over par-common stock		199,290		115,220
Retained earnings		524,250		493,940
	Total liabilities and stockholders’ equity	$981,730		$847,230

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 $89,220 cash.

The common stock was issued for cash.

There was a $70,130 credit to Retained Earnings for net income.

There was a $39,820 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		$

Answer 1

Merrick Equipment Co.
Cash Flow Statement
For year ended December 31, 20Y9
A. Cash Flows from Operating Activity
Net Income		$      70,130.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$        7,720.00
Loss on sale of Investment	$        9,910.00
Changes in current operating assets and liabilities:
Increase in Accounts receivables	$      (7,830.00)
Increase in Accounts payables	$      10,790.00
Increase in Inventory	$    (10,180.00)
Increase In Dinidends payable	$        2,190.00
Decrease in Accrued expenses	$      (4,360.00)
		$        8,240.00
Net cash flow from Operating activities		$      78,370.00
B. Cash flows from Investing Activities
Cash received from sale of investments	$      89,220.00
Cash paid for purchase of land	$ (136,460.00)
Cash paid for purchase of equipment	$    (67,330.00)
Net cash flow used for investing activities		$ (114,570.00)
C. Cash Flows from Financing activities
Cash received from sale of common stock	$      95,570.00
Cash paid for dividends	$    (39,820.00)
Cash flows from Financing activities		$      55,750.00
Net Increase (Decrease) in Cash [A+B+C]		$      19,550.00
Cash at the beginning		$    240,610.00
Cash at the end		$    260,160.00