Question

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. In the operating activities section, use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required. In the investing and financing activities section, use a minus sign only to indicate a NET cash outflow for the section.

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

1		Dec 31, 20Y8	Dec 31, 20Y7
2	Assets
3	Cash	$75,170	$92,110
4	Accounts Receivable (net)	115,500	124,180
5	Merchandise Inventory	165,000	153,920
6	Prepaid Expenses	6,720	4,660
7	Equipment	336,110	275,760
8	Accumulated depreciation-equipment	(87,390)	(67,630)
9	Total Assets	$611,110	$583,000
10	Liabilities and Stockholder's Equity
11	Accounts Payable (merchandise creditors)	$128,330	$121,850
12	Mortgage note payable	0	174,900
13	Common stock, $1 par	19,000	12,000
14	Paid-in capital: Excess of issue price over par-common stock	297,000	164,000
15	Retained Earnings	166,780	110,250
16	Total Liabilities and Stockholders' Equity	$611,110	$583,000

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

A	Net Income, $144,720
B	Depreciation reported on the income statement, $42,650
C	Equipment was purchased at a cost of $83,240, and fully depreciated equipment costing $22,890 was discarded, with no salvage realized
D	The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty
E	7,000 shares of common stock were issued at $20 for cash
F	Cash dividends declared and paid, $88,190

Yellow Dog Enterprises Inc

Statement of Cash Flows

For the year ended December 31, 20Y8

1	Cash flows from operating activities
2
3	Adjustments to reconcile net income to net cash flow from operating activities
4
5	Changes in current operating assets and liabilities
6
7
8
9
10	Net cash flow from operating activities
11
12	Cash flows from (used for) investing activities
13
14	Net cash flow used for investing activities
15
16	Cash flows from (used for) financing activities
17
18
19
20	Net cash flow used for financing activities
21
22	Cash at the beginning of the year
23
24	Cash at the end of the year
25

Answer 1

Solution

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities:
Net income	$      144,720.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$       42,650.00
Changes in current operating assets and liabilities:
Decrease in accounts receivables	$         8,680.00
Increase in Inventory	$      (11,080.00)
Increase in accounts payable	$         6,480.00
Increase in prepaid expense	$           (2,060.00)
Net cash flow from operating activities		$      189,390.00
Cash flows from investing activities:
Purchase of Equipment	$      (83,240.00)
Net cash flow used for investing activities		$      (83,240.00)
Cash flows from financing activities:
Issue of common stock	$      140,000.00
Repayment of mortgage	$     (174,900.00)
Payment of Dividend	$      (88,190.00)
Net cash flow used for financing activities		$     (123,090.00)
Change in cash during year		$      (16,940.00)
Cash at the beginning of the year		$       92,110.00
Cash at the end of the year		$       75,170.00