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	Inventories	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-equipment	(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)	$239,550.00	$237,970.00
12	Mortgage note payable	0.00	335,000.00
13	Common stock, $10 par	503,000.00	241,000.00
14	Paid-in capital: Excess of issue price over par—common stock	430,000.00	330,000.00
15	Retained earnings	16,980.00	(6,390.00)
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, $176,740
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.	The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
E.	Cash dividends declared and paid, $153,370

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

Yellow Dog Enterprises Inc.

Statement of Cash Flows

✔

1	Cash flows from 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 investing activities:
13	✔	✔
14	✔		✔
15
16	Cash flows from financing activities:
17	✔
18	✔	✔
19	✔	✔
20
21	✔
22	Cash at the beginning of the year
23	Cash at the end of the year

Answer 1

Cash Flow Statement
Indirect Method
Cash flow from Operating Activities
Net Income		$         176,740
Adjustments
Depreciation	$           83,110
Changes in current assets and liabilities
Decrease in Accounts Receivable	$           18,260
Increase in Inventory	$         (22,290)
Increase in Prepaid Expenses	$            (2,610)
Increase in Accounts payable	$             1,580
Total Adjustments		$           78,050
Net Cash from operating activities			$       254,790
Cash flow from Investing Activities
Purchase of Equipment		$        (161,890)
Net Cash used in investing activities			$     (161,890)
Cash flow from Financing Activities
Repayment of Mortgage Payable		$        (335,000)
Issue of Common Stock		$         362,000
Payment of cash dividends		$        (153,370)
Net Cash used in financing activities			$     (126,370)
Net Increase in cash			$       (33,470)
Cash, beginning of the year			$       179,930
Cash, ending of the year			$       146,460