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		$78,560		$96,770
Accounts receivable (net)		120,710		130,460
Merchandise inventory		172,440		161,700
Prepaid expenses		7,030		4,900
Equipment		351,270		289,710
Accumulated depreciation-equipment		(91,330)		(71,050)
	Total assets	$638,680		$612,490
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$134,120		$128,010
Mortgage note payable		0		183,750
Common stock, $1 par		21,000		13,000
Paid-in capital: Excess of issue price over par-common stock		293,000		173,000
Retained earnings		190,560		114,730
	Total liabilities and stockholders’ equity	$638,680		$612,490

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, $194,120.
2. Depreciation reported on the income statement, $44,330.
3. Equipment was purchased at a cost of $85,610, and fully depreciated equipment costing $24,050 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. 8,000 shares of common stock were issued at $16 for cash.
6. Cash dividends declared and paid, $118,290.

Required:

Prepare a statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, 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:
	$
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 used for financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

Answer 1

Yellow Dog Enterprises Inc.
Statement of Cash flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities
Net Income		$   194,120
Adjustments to reconcile net income to ;
Depreciation expense	$      44,330
Changes in current operating assets and liabilities
Decrease in accounts receivable	$        9,750
Increase in inventories	$   (10,740)
Increase in prepaid expenses	$      (2,130)
Increase in accounts payable	$        6,110
		$      47,320
Net cash flow from operating activities		$   241,440
Cash flows from investing activities
Cash paid for equipment	$   (85,610)
Net cash flow used for investing activities		$   (85,610)
Cash flows from financing activities
Cash paid for dividends	$ (118,290)
Cash paid to retire mortgage note payable	$ (183,750)
Cash received from sale of common stock	$   128,000
Net cash flow used by financing activities		$ (174,040)
Net decrease in cash		$   (18,210)
Cash and cash equivalents at beginning of period		$      96,770
Cash and cash equivalents at end of period		$      78,560

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