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	$146,480.00	$179,640.00
4	Accounts receivable (net)	225,010.00	241,920.00
5	Merchandise inventory	321,600.00	298,870.00
6	Prepaid expenses	13,030.00	10,420.00
7	Equipment	654,380.00	537,900.00
8	Accumulated depreciation-equipment	(169,970.00)	(133,130.00)
9	Total assets	$1,190,530.00	$1,135,620.00
10	Liabilities and Stockholders’ Equity
11	Accounts payable (merchandise creditors)	$250,960.00	$236,720.00
12	Mortgage note payable	????0.00	335,410.00
13	Common stock, $10 par	75,000.00	25,000.00
14	Paid-in capital: Excess of issue price over par—common stock	440,000.00	310,000.00
15	Retained earnings	424,570.00	228,490.00
16	Total liabilities and stockholders’ equity	$1,190,530.00	$1,135,620.00

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, $348,560
B.	Depreciation reported on the income statement, $82,480
C.	Equipment was purchased at a cost of $162,120 and fully depreciated equipment costing $45,640 was discarded, with no salvage realized.
D.	10,000 shares of common stock were issued at $18 for cash.
E.	The mortgage note payable was not due until 2018 but the terms permitted earlier payment without penalty.
F.	Cash dividends declared and paid, $152,480

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

Cash flow indirect method
Cash flow from operating activities
Net income		348560
Adjustments to reconcile the net income
Depreciation expense	82480
Changes in current asset and liabilities
decrease in prepaid expense	-2610
decrease in accounts receivable	16910
Increase in Inventory	-22730
Increase in accounts payable	14240
		88290
Cash flow from operating activities		436850
Cash flow from Investing activities
Equipment purchased	-162120
Cash flow from Investing activities		-162120

	Cash flow from Financing activities
	Bank loan repaid	-335410
	Common stock	100000
	Paid in capital in excess of par	80000
	Dividend paid	-152480
	Cash flow from Financing activities		-307890
	Net Cash and cash equivalent		-33160
Add	Beginning cash and cash equivalent		179640
	Ending cash and cash equivalent		146480