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

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		$251,070	$232,750
Accounts receivable (net)		90,950	83,590
Inventories		256,760	247,500
Investments		0	95,890
Land		131,690	0
Equipment		283,280	218,810
Accumulated depreciation—equipment		(66,320)	(59,010)
	Total assets	$947,430	$819,530

Liabilities and Stockholders' Equity
Accounts payable		$171,480	$161,450
Accrued expenses payable		17,050	21,310
Dividends payable		9,470	7,380
Common stock, $10 par		51,160	40,160
Paid-in capital: Excess of issue price over par-common stock		192,330	111,460
Retained earnings		505,940	477,770
	Total liabilities and stockholders’ equity	$947,430	$819,530

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 $86,300 cash.

The common stock was issued for cash.

There was a $66,690 credit to Retained Earnings for net income.

There was a $38,520 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 out flows, cash payments, decreases in cash, or any negative adjustments.

Merrick Equipment Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y9

Solutions

Expert Solution

Merrick Equipment Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
Net income	$ 66,690.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$ 7,310.00
Loss on sale of investments	$ 9,590.00
Changes in current operating assets and liabilities:
Increase in accounts receivable	$ (7,360.00)
Increase in inventories	$ (9,260.00)
Increase in accounts payable	$ 10,030.00
Decrease in accrued expenses payable	$ (4,260.00)
Net cash flow from operating activities		$ 72,740.00

Cash flows from (used for) investing activities:
Cash from sale of investments	$ 86,300.00
Cash used for purchase of land	$ (1,31,690.00)
Cash used for purchase of equipment	$ (64,470.00)
Net cash flow used for investing activities		$(1,09,860.00)

Cash flows from (used for) financing activities:
Cash from sale of common stock	$ 91,870.00
Cash used for dividends	$ (36,430.00)
Net cash flow from financing activities		$ 55,440.00

Increase in cash		$ 18,320.00
Cash at the beginning of the year		$ 2,32,750.00
Cash at the end of the year		$ 2,51,070.00

General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.

ekkarill92 answered 1 year ago

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