Question

In: Accounting

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

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

$80,000.00

$100,000.00

4

Accounts receivable (net)

275,000.00

300,000.00

5

Inventories

510,000.00

400,000.00

6

Prepaid expenses

15,000.00

10,000.00

7

Equipment

1,070,000.00

750,000.00

8

Accumulated depreciation-equipment

(200,000.00)

(160,000.00)

9

Total assets

$1,750,000.00

$1,400,000.00

10

Liabilities and Stockholders’ Equity

11

Accounts payable (merchandise creditors)

$100,000.00

$90,000.00

12

Mortgage note payable

0.00

400,000.00

13

Common stock, $10 par

600,000.00

200,000.00

14

Paid-in capital: Excess of issue price over par—common stock

300,000.00

100,000.00

15

Retained earnings

750,000.00

610,000.00

16

Total liabilities and stockholders’ equity

$1,750,000.00

$1,400,000.00

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, $190,000.
b. Depreciation reported on the income statement, $115,000.
c. Equipment was purchased at a cost of $395,000 and fully depreciated equipment costing $75,000 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. 40,000 shares of common stock were issued at $15 for cash.

f. Cash dividends declared and paid, $50,000.

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. Enter amounts that represent cash outflows as negative numbers using a minus sign.

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
Change in cash
December 31, 20Y8
Decrease in inventory
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 inventory
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 income
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. Enter amounts that represent cash outflows as negative numbers using a minus sign.

Solutions

Expert Solution

Statement of cash flow
cash from operating activities
net income for the year 190,000
adjustments to reconcile net income
Depreciation 115,000
Decrease in account receivable 25,000
increase in inventory -110,000
increase in prepaid expense -5,000
increase in accounts payable 10,000
net cash flow from operating activities 225,000
Cash from investing activities
cash paid for equipment -395,000
net cash flow used for investing activities -395,000
Cash from financing activities
cash paid to retire mortgage payable -400,000
cash recieved from sale of common stock 600,000
Cash dividend paid -50,000
net cash flow from financing activities 150,000
Net decrease in cash -20,000
cash at the beginning of the year 100,000
cash at year end 80,000

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