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 $146,460.00 $179,930.00 4 Accounts receivable (net) 224,660.00 242,920.00 5 Merchandise inventory 321,290.00 299,000.00 6 Prepaid expenses 13,120.00 10,510.00 7 Equipment 654,510.00 537,990.00 8 Accumulated depreciation (170,510.00) (132,770.00) 9 Total assets $1,189,530.00 $1,137,580.00 10 Liabilities and Stockholders’ Equity 11 Accounts payable (merchandise creditors) $249,550.00 $237,970.00 12 Mortgage note payable     0.00 335,000.00 13 Common stock, $10 par 75,000.00 25,000.00 14 Paid-in capital: Excess of issue price over par—common stock 500,000.00 330,000.00 15 Retained earnings 364,980.00 209,610.00 16 Total liabilities and stockholders’ equity $1,189,530.00 $1,137,580.00 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, $308,740. B. Depreciation reported on the income statement, $83,110. C. Equipment was purchased at a cost of $161,890 and fully depreciated equipment costing $45,370 was discarded, with no salvage realized. D. 10,000 shares of common stock were issued at $22 for cash. E. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty. F. Cash dividends declared and paid, $153,370. 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 out flows, cash payments, decreases in cash, or any negative adjustments.

Answer 1

			Yellow dog enterprises
			Statement of cash flows
		For the year ended December 31,20Y8
						$	$
	Operating activities:
	Net income		(Profit for the year)				308740
	Adjustments to reconcile net income to
	Depreciation expense			(Note:1)		83110
	Decrease in accounts receivable			(242920-224660)		18260
	Increase in inventory			(321290-299000)		-22290
	Increase in prepaid expenses			(13120-10510)		-2610
	Increase in accounts payable			(249550-237970)		11580	88050
	Cash flow from operating activities				a		396790
	Investing activities:
	Purchase of equipment					-161890
	Cash flow from investing activities				b		-161890
	Financing activities:
	Repayment of mortgage					-335000
	Issue of common shares				(Note:1)	220000
	Dividend paid					-153370
	Cash flow from financing activities				c		-268370
	Net increase in cash				a+b+c		-33470
	Add:Beginning balance of cash						179930
	Ending balance of cash						146460
	Note:1
	Issue of common shares=Increase in common stock+Increase in excess of issue price over par=(75000-25000)+(500000-330000)=$ 220000