Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:

		Dec. 31, 20Y8		Dec. 31, 20Y7
Assets
Cash		$62,270		$76,300
Accounts receivable (net)		95,680		102,870
Inventories		136,670		127,500
Prepaid expenses		5,570		3,860
Equipment		278,430		228,430
Accumulated depreciation-equipment		(72,390)		(56,020)
	Total assets	$506,230		$482,940
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$106,310		$100,930
Mortgage note payable		0		144,880
Common stock, $1 par		16,000		10,000
Paid-in capital: Excess of issue price over par-common stock		226,000		136,000
Retained earnings		157,920		91,130
	Total liabilities and stockholders’ equity	$506,230		$482,940

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:

1. Net income, $170,980.
2. Depreciation reported on the income statement, $35,330.
3. Equipment was purchased at a cost of $68,960, and fully depreciated equipment costing $18,960 was discarded, with no salvage realized.
4. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
5. 6,000 shares of common stock were issued at $16 for cash.
6. Cash dividends declared and paid, $104,190.

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.

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities:
Net income	$
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation
Changes in current operating assets and liabilities:
Decrease in accounts receivable
Increase in inventory
Increase in prepaid expenses
Increase in accounts payable
Net cash flow from operating activities		$
Cash flows from investing activities:
Cash paid for equipment	$
Net cash flow used for investing activities
Cash flows from financing activities:
Cash received from sale of common stock	$
Cash paid for dividends
Cash paid to retire mortgage note payable
Net cash flow used for financing activities
Change in cash		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1