Question

In: Accounting

Problem 2: Instructions: Prepare a statement of cash flows using the indirect method. The comparative balance...

Problem 2:

Instructions: Prepare a statement of cash flows using the indirect method.

The comparative balance sheet for the ZYX Company at December 31, 2019 and 2018 is as follows:

                                                                                                                   12/31/19                          12/31/18

                                  Assets:

Cash                                                                                                          $146,600                          $179,800

Accounts Receivable                                                                                 224,600                           242,000

Merchandise Inventory                                                                             321,600                          299,200

Prepaid Expenses                                                                                          13,400                              9,600

Equipment                                                                                                    655,000                           537,000

Accumulated depreciation-equipment                                                  (170,800)                         (132,200)

                           Total Assets                                                                     $1,190,400                     $1,135,400

              Liabilities and Stockholders’ Equity

Accounts payable (merchandise creditors)                                           $250,200                         $237,600

Mortgage note payable                                                                                       0                               336,000

Common Stock, $10 par                                                                                 74,000                            24,000

Paid in Capital-common stock                                                                     470,000                         320,000

Retained Earnings                                                                                          396,200                         217,800

         Total Liabilities and Stockholders’ Equity                                       $1,190,400                    $1,135,400

Additional data obtained from an examination of the accounts in the ledger for 2019 are as follows:

  1. Net Income, $332,000

  1. Depreciation reported on the income statement, $83,400

  1. Equipment was purchased at a cost of &162,800 and fully depreciated equipment costing $44,800 was discarded.

  1. The mortgage note payable was not due until 2021 but the terms permitted earlier payment without penalty

  1. 10,000 shares of common stock were issued at $20 for cash

  1. Cash dividends declared and paid, $153,600

Solutions

Expert Solution

ZYX Company
Statement of Cash Flows
For the year ended December 31 2019
Particulars Amount
Cash Flows from Operating Activities
Net Income 332000
Adjustments to reconcile net income to Net Cash flows from Operating Activities
Depreciation Expense 83400
Decrease in Account receivable 17400
Increase in Inventory -22400
Increase in prepaid Expenses -3800
Increase in Accounts Payable 12600
Net Cash flows from operating activities 419200
Cash flows from Investing Activities
Purchase of Equipment -162800
Net Cash flows from Investing Activities -162800
Cash flows from Financing Activities
Issue of Common Stock 200000
Dividends paid -153600
Mortgage note payable paid -336000
Net cash flows from Financing Activities -289600
Net Change in Cash -33200
Add :Cash at the Beginning of the period 179800
Ending Cash Balance 146600

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