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 $101,980 cash.

The common stock was issued for cash.

There was a $71,940 credit to Retained Earnings for net income.

There was a $45,520 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 $293,310 $275,050 Accounts receivable (net) 106,260 98,790 Inventories 299,950 292,480 Investments 0 113,310 Land 153,850 0 Equipment 330,950 258,590 Accumulated depreciation—equipment (77,480) (69,730) Total assets $1,106,840 $968,490 Liabilities and Stockholders' Equity Accounts payable $200,340 $190,790 Accrued expenses payable 19,920 25,180 Dividends payable 11,070 8,720 Common stock, $10 par 59,770 47,460 Paid-in capital: Excess of issue price over par-common stock 224,690 131,710 Retained earnings 591,050 564,630 Total liabilities and stockholders’ equity $1,106,840 $968,490

Explanation / Answer

CASH FLOW STATEMENT Cash flows from operating activities $         71,940.00 Net income Adjustments for: Depreciation and amortization $           7,750.00 Loss on sale of investment [113310-101980] $         11,330.00 Increase in trade receivables $         (7,470.00) Increase in inventories $         (7,470.00) Inecrease in trade payables $           9,550.00 Decrease in accrued libility $         (5,260.00) Cash generated from operations $    80,370.00 Cash flows from investing activities Purchase of equipment [ 330950-258590] $       (72,360.00) Purchase of Land $    (153,850.00) Proceeds from sale of Investment $       101,980.00 Net cash used in investing activities $ (124,230.00) Cash flows from financing activities Issue of common stock 59770-47460] $         12,310.00 received Paid up capitalin ecxess of par [224690-131710] $         92,980.00 Proceeds from issuance of long-term debt Cash Dividend paid $       (43,170.00) Net cash used in financing activities $    62,120.00 Net increase in cash and cash equivalents $    18,260.00 Cash and cash equivalents at beginning of period $       275,050.00 Cash and cash equivalents at end of period $       293,310.00

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