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 $83,700 cash.

The common stock was issued for cash.

There was a $57,390 credit to Retained Earnings for net income.

Dec. 31, 20Y9 Dec. 31, 20Y8 Assets Cash $239,910 $225,750 Accounts receivable (net) 86,910 81,080 Inventories 245,350 240,050 Investments 0 93,000 Land 125,840 0 Equipment 270,690 212,230 Accumulated depreciation—equipment (63,370) (57,230) Total assets $905,330 $794,880 Liabilities and Stockholders' Equity Accounts payable $163,860 $156,590 Accrued expenses payable 16,300 20,670 Dividends payable 9,050 7,150 Common stock, $10 par 48,890 38,950 Paid-in capital: Excess of issue price over par-common stock 183,780 108,100 Retained earnings 483,450 463,420 Total liabilities and stockholders’ equity $905,330 $794,880 Required: Prepare a statement of cash fows, 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 liabilitles: 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

Merrick Equipment Co Statement of Cash Flows   For the Year Ended December 31, 20Y9 Cash flows from operating activities Net Income   $      57,390 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation expense $        6,140 63370-57230 Loss on sale of investment $        9,300 93000-83700 Changes in current operating assets and liabilities Increase in accounts receivable $      (5,830) 81080-86910 Increase in inventory $      (5,300) 240050-245350 Increase in accounts payable $        7,270 163860-156590 Decrease in accrued expense payable $      (4,370) 16300-20670 $        7,210 Net cash provided by operating activities $      64,600 Cash flows from investing activities Cash from sale of investments $      83,700 Cash paid for purchase of equipment $   (58,460) 212230-270690 Cash paid for purchase of land $ (125,840) Net cash used by investing activities $ (100,600) Cash flows from financing activities Cash paid for dividends $   (35,460) 9050-37360-7150 Cash from issuance of common stock $      85,620 48890-38950+183780-108100 Net cash provided by financing activities $      50,160 Net Increase in cash and cash equivalents $      14,160 Cash and cash equivalents at beginning of period $   225,750 Cash and cash equivalents at end of period $   239,910

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