Statement of Cash Flows—Indirect Method The comparative balance sheet of Merrick

Question

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows:

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 $84,930 cash.

The common stock was issued for cash.

There was a $60,470 credit to Retained Earnings for net income.

There was a $37,910 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.

Dec. 31, 20Y9 Dec. 31, 20Y8 Assets Cash $244,570 $229,080 Accounts receivable (net) 88,600 82,280 Inventories 250,110 243,600 Investments 0 94,370 Land 128,280 0 Equipment 275,950 215,370 Accumulated depreciation—equipment (64,600) (58,080) Total assets $922,910 $806,620 Liabilities and Stockholders' Equity Accounts payable $167,050 $158,900 Accrued expenses payable 16,610 20,970 Dividends payable 9,230 7,260 Common stock, $10 par 49,840 39,520 Paid-in capital: Excess of issue price over par-common stock 187,350 109,700 Retained earnings 492,830 470,270 Total liabilities and stockholders’ equity $922,910 $806,620

Explanation / Answer

Merrick Equipment Co. Statement of Cash Flows For the Year Ended December 31, 20Y9 Cash flows from operating activities: Net Income 60470 Adjustments to reconcile net income to net cash flow from operating activities: Loss on sale of investment [94370cost -84930sale value] 9440 Depreciation [64600-58080] 6520 Changes in current operating assets and liabilities: Increase in accounts receivable [88600-82280] (6320) Increase in inventories [250110-243600] (6510) Increase in accounts payable [167050-158900] 8150 Decrease in Accrued expenses payable [20970-16610] (4360) 6920 Net cash flow from operating activities 67390 Cash flows from (used for) investing activities: sale of investment 84930 purchase of land (128280) Purchase of equipment [275950-215370] (60580) Net cash flow used for investing activities (103930) Cash flows from (used for) financing activities: Issue of common stock ,par [49840-39520] 10320 Paid-in capital: Excess of issue price over par-common stock [187350-109700] 77650 Dividendpaid [7260+37910-9230] (35940) Net cash flow from financing activities 52030 Increase/(decrease)in cash during the year 15490 Beginning cash balance 229080 Cash at the end of the year 244570

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