Question

The Murdock Corporation reported the following balance sheet data for 2016 and 2015: 2016 2015 Cash $ 80,705 $ 24,755 Available-for-sale securities (not cash equivalents) 17,000 88,000 Accounts receivable 83,000 70,950 Inventory 168,000 147,700 Prepaid insurance 1,770 2,300 Land, buildings, and equipment 1,256,000 1,128,000 Accumulated depreciation (613,000 ) (575,000 ) Total assets $ 993,475 $ 886,705 Accounts payable $ 79,040 $ 151,670 Salaries payable 21,200 26,000 Notes payable (current) 27,700 78,000 Bonds payable 203,000 0 Common stock 300,000 300,000 Retained earnings 362,535 331,035 Total liabilities and shareholders' equity $ 993,475 $ 886,705 Additional information for 2016: Sold available-for-sale securities costing $71,000 for $75,800. Equipment costing $20,000 with a book value of $5,300 was sold for $6,450. Issued 6% bonds payable at face value, $203,000. Purchased new equipment for $148,000 cash. Paid cash dividends of $21,500. Net income was $53,000. Required: Prepare a statement of cash flows for 2016 in good form using the indirect method for cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

		Statement of cash flow
Cash flows from operating activities
Net income					53,000
Adjustments for non cash effect
Depreciation expense					52,700
gain on sale of equipment					-1150
gain on sale of available for securities					-4800
increase in account receivable					-12050
increase in inventory					-20300
decrease in prepaid insurance					530
Decrease in accounts payable					-72630
decrease in salaries payable					-4,800
Net cash flows from operating activities						-9,500
Cash flows from investing activities
cash from sale of securities					75,800
cash from sale of equipment					6,450
cash paid for purchase of equipment					-148000
net cash flows from investing activities						-65,750
Cash flows from financing activities
cash from bond issue					203,000
cash dividend paid					-21,500
payment of notes payable					-50300
net cash flows from financing activities						131200
Net increase in cash						55,950
Cash balance,January 1						24,755
Cash balance ,december 31						80,705
Working notes:
depreciation
accumulated dep2016				613,000
less
accumulated dep2015			575000
less:accum dep of sold equipment			-14700	560,300
Depreciation expense for the year				52,700