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: Dec. 31, 20Y9 Dec. 31, 20Y8 Assets Cash $239,430 $222,980 Accounts receivable (net) 86,740 80,090 Inventories 244,850 237,110 Investments 0 91,860 Land 125,590 0 Equipment 270,150 209,640 Accumulated depreciation—equipment (63,250) (56,530) Total assets $903,510 $785,150 Liabilities and Stockholders' Equity Accounts payable $163,540 $154,670 Accrued expenses payable 16,260 20,410 Dividends payable 9,040 7,070 Common stock, $10 par 48,790 38,470 Paid-in capital: Excess of issue price over par-common stock 183,410 106,780 Retained earnings 482,470 457,750 Total liabilities and stockholders’ equity $903,510 $785,150 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 $82,670 cash. The common stock was issued for cash. There was a $61,620 credit to Retained Earnings for net income. There was a $36,900 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. Merrick Equipment Co. Statement of Cash Flows For the Year Ended December 31, 20Y9 Cash flows from operating activities: $ Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities $ Cash flows from (used for) investing activities: $ Net cash flow used for investing activities Cash flows from (used for) financing activities: Net cash flow from financing activities $ Cash at the beginning of the year Cash at the end of the year $

Explanation / Answer

Cash Flow Statement Cash flows from Operating activities Net income for the year 61620 Adjustment for reconciliation Depreciation 6720 Loss on sale of investment 9190 Increase in Accounts receivable -6,650 Increase in Inventory -7740 Increase in Accounts payable 8870 Decrease in Accrued expense -4150 Net cash provided from Operating activities 67,860 Cash flows f rom Investing activities Sale of investment 82,670 Purchase of land -125590 Purchase of equipment -60510 Net cash used in operating activities -103430 Ccash flows from Financing activities: Dividend paid -34,930 Issue of common Stock 86,950 Net cash provided from Financing activities 52,020 Net increasse in cash 16,450 Beginning balance of cash 222,980 Ending balance of cash 239,430.00

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