In: Accounting
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:
Net Income, $332,000
Depreciation reported on the income statement, $83,400
Equipment was purchased at a cost of &162,800 and fully depreciated equipment costing $44,800 was discarded.
The mortgage note payable was not due until 2021 but the terms permitted earlier payment without penalty
10,000 shares of common stock were issued at $20 for cash
Cash dividends declared and paid, $153,600
| 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 |