In: Accounting
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 |
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.