Question

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, 20Y9 Dec. 31, 20Y8 Assets Cash $298,270 $276,180 Accounts receivable (net) 108,050 99,190 Inventories 305,040 293,700 Investments 0 113,780 Land 156,450 0 Equipment 336,540 259,650 Accumulated depreciation—equipment (78,790) (70,020) Total assets $1,125,560 $972,480 Liabilities and Stockholders' Equity Accounts payable $203,730 $191,580 Accrued expenses payable 20,260 25,280 Dividends payable 11,260 8,750 Common stock, $10 par 60,780 47,650 Paid-in capital: Excess of issue price over par-common stock 228,490 132,260 Retained earnings 601,040 566,960 Total liabilities and stockholders’ equity $1,125,560 $972,480 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 $102,400 cash. The common stock was issued for cash. There was a $79,790 credit to Retained Earnings for net income. There was a $45,710 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: $ Adjustments to reconcile net income to net cash flow from operating activities: 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 $

Answer 1

Ans- Merrick Equipment Company

Statement of Cash Flows

For the Year Ended December 31, 2019

Particulars	Amount ($)	Amount ($)	Amount ($)
Net cash flow from Operating Activities:-
Net Income		$79,790
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation on equipment ($78,790-$70,020)	$8,770
Loss on sale of investment ( $ 102,400-$113,780)	$11,380
		$20,150
		99,940
Changes in current assets & current liabilities:-
Increase in Accounts Receivable	(8,860)
Increase in Inventory	(11,340)
Increase in Accounts Payable	12,150
Decrease in Accrued Expenses Payable	(5,020)
		(13,070)
Net cash flow from operating activities			86,870
Net cash flow from Investing activities:-
Sale of Investments	102,400
		102,400
Purchase of Land	156,450
Purchase of Equipment( $336,540-$259,650)	76,890
		(233,340)
Net Cash used in Investing activities			(130,940)
Net cash flow from Financing Activities:
Issue of common stock ($60,780-$47,650)+($228,490-$132,260)	109,360
		109,360
Less :Dividend paid ($45,710-($11,260-$8,750)	43,200
		43,200
Net cash flow from Financing Activities			66,160
Net increase/ (decrease)in cash			22,090
Cash at the beginning of the year			276,180
Cash at the end of the year			298,270

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