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The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as...

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 $286,470 $266,790
Accounts receivable (net) 103,780 95,820
Inventories 292,960 283,710
Investments 0 109,910
Land 150,260 0
Equipment 323,220 250,820
Accumulated depreciation—equipment (75,670) (67,640)
Total assets $1,081,020 $939,410
Liabilities and Stockholders' Equity
Accounts payable $195,660 $185,060
Accrued expenses payable 19,460 24,420
Dividends payable 10,810 8,450
Common stock, $10 par 58,380 46,030
Paid-in capital: Excess of issue price over par-common stock 219,450 127,760
Retained earnings 577,260 547,690
Total liabilities and stockholders’ equity $1,081,020 $939,410

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

  1. Equipment and land were acquired for cash.
  2. There were no disposals of equipment during the year.
  3. The investments were sold for $98,920 cash.
  4. The common stock was issued for cash.
  5. There was a $73,720 credit to Retained Earnings for net income.
  6. There was a $44,150 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 outflows, 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:
Net income $
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation
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

Solutions

Expert Solution

Solution

Merrick Equipment Co.
Cash Flow Statement
For year ended December 31, 20Y9
A. Cash Flows from Operating Activity
Net Income $           73,720.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense $             8,030.00
Loss on sale of Investment $           10,990.00
Changes in current operating assets and liabilities:
Decrease in Accounts receivables $           (7,960.00)
Increase in Inventory $           (9,250.00)
Increase in Accounts payable $           10,600.00
Decrease in Accrued expenses $           (4,960.00)
$             7,450.00
Net cash flow from Operating activities $           81,170.00
B. Cash flows from Investing Activities
Cash received from sale of investments $           98,920.00
Cash paid for purchase of land $      (150,260.00)
Cash paid for purchase of equipment $        (72,400.00)
Net cash flow used for investing activities $      (123,740.00)
C. Cash Flows from Financing activities
Cash received from sale of common stock $        104,040.00
Cash paid for dividends $        (41,790.00)
Cash flows from Financing activities $           62,250.00
Net Increase (Decrease) in Cash [A+B+C] $           19,680.00
Cash at the beginning $        266,790.00
Cash at the end $        286,470.00

.Working

Dividends declared $           44,150.00
Less: Increase in dividends payable $           (2,360.00)
Dovidends paiud in cash $           41,790.00

ekkarill92 answered 2 years ago
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