Question

Problem 23-01

The following are Marigold Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020.

COMPARATIVE BALANCE SHEETS
		2020			2019			Increase (Decrease)
Cash		$810,600			$701,400			$109,200
Accounts receivable		1,135,300			1,156,300			(21,000	)
Inventory		1,850,800			1,708,800			142,000
Property, plant, and equipment		3,318,800			2,955,300			363,500
Accumulated depreciation		(1,164,400	)		(1,035,600	)		(128,800	)
Investment in Myers Co.		307,400			277,400			30,000
Loan receivable		248,800			—			248,800
Total assets		$6,507,300			$5,763,600			$743,700
Accounts payable		$1,015,700			$949,200			$66,500
Income taxes payable		30,200			50,000			(19,800	)
Dividends payable		79,500			100,400			(20,900	)
Lease liabililty		423,200			—			423,200
Common stock, $1 par		500,000			500,000			—
Paid-in capital in excess of par—common stock		1,499,000			1,499,000			—
Retained earnings		2,959,700			2,665,000			294,700
Total liabilities and stockholders’ equity		$6,507,300			$5,763,600			$743,700

Additional information:

1.		On December 31, 2019, Marigold acquired 25% of Myers Co.’s common stock for $277,400. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,109,600. Myers reported income of $120,000 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year.
2.		During 2020, Marigold loaned $323,600 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $74,800, plus interest at 10%, on December 31, 2020.
3.		On January 2, 2020, Marigold sold equipment costing $59,700, with a carrying amount of $37,700, for $39,900 cash.
4.		On December 31, 2020, Marigold entered into a capital lease for an office building. The present value of the annual rental payments is $423,200, which equals the fair value of the building. Marigold made the first rental payment of $60,000 when due on January 2, 2021.
5.		Net income for 2020 was $374,200.
6.		Marigold declared and paid the following cash dividends for 2020 and 2019.

		2020		2019
Declared		December 15, 2020		December 15, 2019
Paid		February 28, 2021		February 28, 2020
Amount		$79,500		$100,400

Prepare a statement of cash flows for Marigold Corp. for the year ended December 31, 2020, using the indirect method.

Answer 1

STATEMENT OF CASH FLOWS [INDIRECT METHOD]
Cash flows from operating activities:
Net income		$   3,74,200
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation [128800+22000]	$   1,50,800
Income from equity investment	$     -30,000
Gain on sale of equipment	$       -2,200
Increase in inventory	$ -1,42,000
Decrease in receivables	$      21,000
Increase in accounts payables	$      66,500
Decrease in taxes payable	$     -19,800	$      44,300
Net cash from operating activities		$   4,18,500
Cash flows from investing activities:
Loans made	$ -3,23,600
Receipt against loan	$      74,800
Sale of equipment	$      39,900
Net cash used by investing activities		$ -2,08,900
Cash flows from financing activities:
Dividends paid	$ -1,00,400
Net cash used by financing activitites		$ -1,00,400
Increase in cash during the period		$   1,09,200
Cash at the beginning of the period		$   7,01,400
Cash at the end of the period		$   8,10,600