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		$55,420		$67,630
Accounts receivable (net)		85,160		91,170
Inventories		121,650		113,010
Prepaid expenses		4,960		3,420
Equipment		247,820		202,470
Accumulated depreciation-equipment		(64,430)		(49,650)
	Total assets	$450,580		$428,050
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$94,620		$89,460
Mortgage note payable		0		128,420
Common stock, $1 par		14,000		9,000
Paid-in capital in excess of par-common stock		196,000		121,000
Retained earnings		145,960		80,170
	Total liabilities and stockholders’ equity	$450,580		$428,050

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, $168,420.
2. Depreciation reported on the income statement, $31,590.
3. Equipment was purchased at a cost of $62,160 and fully depreciated equipment costing $16,810 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. 5,000 shares of common stock were issued at $16 for cash.
6. Cash dividends declared and paid, $102,630.

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 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 (used for) 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 inventories
Increase in prepaid expenses
Increase in accounts payable
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
Cash paid for equipment	$
Net cash flow used for investing activities
Cash flows from (used for) 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
Net decrease in cash		$
Cash balance, January 1, 20Y8
Cash balance, December 31, 20Y8

Answer 1