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Statement of Cash Flows—Indirect Method The comparative balance sheet of Merrick Equipment Co. for December 31,...

Statement of Cash Flows—Indirect Method

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 $292,000 $274,760
Accounts receivable (net) 105,780 98,680
Inventories 298,610 292,180
Investments 0 113,190
Land 153,160 0
Equipment 329,470 258,310
Accumulated depreciation—equipment (77,130) (69,660)
Total assets $1,101,890 $967,460
Liabilities and Stockholders' Equity
Accounts payable $199,440 $190,590
Accrued expenses payable 19,830 25,150
Dividends payable 11,020 8,710
Common stock, $10 par 59,500 47,410
Paid-in capital: Excess of issue price over par-common stock 223,680 131,570
Retained earnings 588,420 564,030
Total liabilities and stockholders’ equity $1,101,890 $967,460

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 $101,870 cash.

The common stock was issued for cash.

There was a $69,860 credit to Retained Earnings for net income.

There was a $45,470 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.

Solutions

Expert Solution

Merrick Equipment Co.

CASH FLOW STATEMENT FOR THE YEAR ENDED Dec 31, 2019

$

$

CASH FLOW FROM OPERATING ACTIVITIES

Net Income

           69,860.00

Adjustment For non cash items and working capital changes:

Loss on sale of investments (113190 - 101870)

           11,320.00

Depreciation

             7,470.00

Increase in Accounts receivable

            -7,100.00

Increase in inventory

            -6,430.00

Increase in Accounts payable

             8,850.00

Decrease in Accrued expenses payable

            -5,320.00

NET CASH FROM OPERATING ACTIVITIES (A)

          78,650.00

CASH FLOW FROM INVESTING ACTIVITIES

Sale of investments

       1,01,870.00

Purchase of Land

     -1,53,160.00

Purchase of Equipment

         -71,160.00

NET CASH FROM INVESTING ACTIVITIES (B)

    -1,22,450.00

CASH FLOW FROM FINANCING ACTIVITIES

Issuance of stock (12090+92110)

       1,04,200.00

Payment of dividend (45470 + 8710 - 11020)

         -43,160.00

NET CASH FROM FINANCING ACTIVITIES (C)

          61,040.00

NET CHANGES IN CASH AND CASH EQUIVALENTS (A+B+C)

          17,240.00

ADD: OPENING CASH AND CASH EQUIVALENTS

      2,74,760.00

CLOSING CASH AND CASH EQUIVALENTS

      2,92,000.00

ekkarill92 answered 1 year ago
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