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Statement of Cash Flows—Indirect Method The comparative balance sheet of Merrick Equipment Co. for December 31,...

Statement of Cash Flows—Indirect Method

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

Dec. 31, 20Y9Dec. 31, 20Y8

Assets

Cash$307,670 $286,870

Accounts receivable (net)111,460 103,030

Inventories314,640 305,050

Investments0 118,180

Land161,380 0

Equipment347,150 269,700

Accumulated depreciation—equipment(81,270) (72,730)

Total assets$1,161,030 $1,010,100

Liabilities and Stockholders' Equity

Accounts payable (merchandise creditors)$210,150 $198,990

Accrued expenses payable (operating expenses)20,900 26,260

Dividends payable11,610 9,090

Common stock, $10 par62,700 49,490

Paid-in capital in excess of par—common stock235,690 137,370

Retained earnings619,980 588,900

Total liabilities and stockholders’ equity$1,161,030 $1,010,100

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

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $138,270 cash.

The common stock was issued for cash.

There was a $78,550 credit to Retained Earnings for net income.

There was a $47,470 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 (used for) operating activities:

Net income $

Adjustments to reconcile net income to net cash flow from operating activities:

Depreciation

Gain on sale of investments

Changes in current operating assets and liabilities:

Increase in accounts receivable

Increase in inventories

Increase in accounts payable

Decrease in accrued expenses payable

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 balance, January 1, 20Y9

Cash balance, December 31, 20Y9 $

Solutions

Expert Solution

Answer-

MERRICK EQUIPMENT CO.
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,20Y9

Particulars		Amount
		$
Cash flow from operating activities
Net Income		78550
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects

Depreciation	($81270 -$72730)	8540
Gain on sale of investment	($138270 - $118180)	-20090

Change in operating assets & liabilities

Increase in accounts receivable	($111460-103030)	-8430
Increase in inventory	($314640-$305050)	-9590
Decrease in accrued expenses payable	($26260-$20900)	-5360
Increase in accounts payable	($210150-$198990)	11160

Net cash flow from operating activities (a)		54780

Cash Flow from Investing activities

Cash used for purchase of equipment	($347150 -$269700)	-77450
Cash received for sale of inventments		138270
Cash used for purchase of land		-161380
Net cash Flow from Investing activities (b)		-100560

Cash Flow from Financing activities

Cash used for dividends	($47470+$9090-$11610)	-44950
Cash from sale of common stock		111530

Net cash Flow from Financing activities (c)		66580

Net Change in cash c=a+b+c		20800
Cash at the beginning of the year		286870

Cash at the end of the year		307670

ekkarill92 answered 1 year ago

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