Question

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	$95,000.00	$110,000.00
4	Accounts receivable (net)	260,000.00	280,000.00
5	Inventories	520,000.00	450,000.00
6	Prepaid expenses	15,000.00	5,000.00
7	Equipment	1,130,000.00	800,000.00
8	Accumulated depreciation-equipment	(235,000.00)	(190,000.00)
9	Total assets	$1,785,000.00	$1,455,000.00
10	Liabilities and Stockholders’ Equity
11	Accounts payable (merchandise creditors)	$100,000.00	$75,000.00
12	Mortgage note payable	0.00	500,000.00
13	Common stock, $10 par	500,000.00	200,000.00
14	Paid-in capital in excess of par—common stock	400,000.00	100,000.00
15	Retained earnings	785,000.00	580,000.00
16	Total liabilities and stockholders’ equity	$1,785,000.00	$1,455,000.00

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, $250,000.
	b. Depreciation reported on the income statement, $135,000.
	c. Equipment was purchased at a cost of $420,000 and fully depreciated equipment costing $90,000 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. 30,000 shares of common stock were issued at $20 for cash.
	f. Cash dividends declared and paid, $45,000.

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. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Labels and Amount Descriptions
Cash paid for dividends
Cash paid for equipment
Cash paid for merchandise
Cash paid for purchase of land
Cash paid to retire mortgage note payable
Cash received from customers
Cash received from sale of common stock
December 31, 20Y8
Decrease in inventories
Decrease in accounts payable
Decrease in accounts receivable
Decrease in prepaid expenses
Depreciation
For the Year Ended December 31, 20Y8
Gain on disposal of equipment
Gain on sale of investments
Increase in accounts payable
Increase in accounts receivable
Increase in inventories
Increase in prepaid expenses
Loss on disposal of equipment
Loss on sale of investments
Net cash flow from financing activities
Net cash flow from investing activities
Net cash flow from operating activities
Net cash flow used for financing activities
Net cash flow used for investing activities
Net cash flow used for operating activities
Net decrease in cash
Net income
Net increase in cash
Net loss

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. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Yellow Dog Enterprises Inc.

Statement of Cash Flows

1	Cash flows from (used for) 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
11
12	Cash flows from (used for) investing activities:
13
14
15
16	Cash flows from (used for) financing activities:
17
18
19
20
21
22	Cash balance, January 1, 20Y8
23	Cash balance, December 31, 20Y8

Answer 1

Yellow Dog Enterprises Inc.
Statement of Cash Flow (Using Indirect Method)
For the year ended June 31,20Y8
Particulars		Amount
Cash flow from operating activities
Net Income		$250,000.00
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities
Depreciation	$135,000.00
Change In Operating Assets & Liabilities
Decrease In Accounts Receivable	$20,000.00
Increase In Inventory	-$70,000.00
Increase In Prepaid Expenses	-$10,000.00
Increase In Accounts Payable	$25,000.00	$100,000.00
Net Cash Flow From Operating Activities (A)		$350,000.00
Cash Flow From Investing Activities
Equipment Purchased	-$420,000.00
Net Cash Flow From Investing Activities (B)		-$420,000.00
Cash Flow From Financing Activities
Dividends Paid	-$45,000.00
Mortgage Notes Paid	-$500,000.00
Proceed from Common Stock (30000*20)	$600,000.00
Net Cash Flow From Financing Activities (C )		$55,000.00
Net Change In Cash C=A+B+C		-$15,000.00
Beginning Cash Balance		$110,000.00
Ending Cash Balance		$95,000.00