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 $256,570 $241,410 Accounts receivable (net) 92,940 86,710 Inventories 262,370 256,710 Investments 0 99,460 Land 134,580 0 Equipment 289,480 226,960 Accumulated depreciation—equipment (67,770) (61,200) Total assets $968,170 $850,050 Liabilities and Stockholders' Equity Accounts payable $175,240 $167,460 Accrued expenses payable 17,430 22,100 Dividends payable 9,680 7,650 Common stock, $10 par 52,280 41,650 Paid-in capital: Excess of issue price over par-common stock 196,540 115,610 Retained earnings 517,000 495,580 Total liabilities and stockholders’ equity $968,170 $850,050 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 $89,510 cash. The common stock was issued for cash. There was a $61,370 credit to Retained Earnings for net income. There was a $39,950 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: Net income $ Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Loss on sale of investments Changes in current operating assets and liabilities: Increase in accounts receivable Increase in inventories Increase in accounts payable Decrease in accrued expenses payable Net cash flow from operating activities $ Cash flows from (used for) investing activities: Cash received from gain on sale of investments $ Cash used for purchase of land Cash used for purchase of equipment Net cash flow used for investing activities Cash flows from (used for) financing activities: Cash from sale of common stock Cash used for dividends Net cash flow from financing activities $ Cash at the beginning of the year Cash at the end of the year $

Explanation / Answer

Statement of Cash Flows For the Year Ended December 31, 20Y9 Cash flows from operating activities: Net income 61370 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 6570 Loss on sale of investments 9950 Changes in current operating assets and liabilities: Increase in accounts receivable -6230 Increase in inventories -5660 Increase in accounts payable 7780 Decrease in accrued expenses payable -4670 Net cash flow from operating activities 69110 Cash flows from (used for) investing activities: Cash received from sale of investments 89510 Cash used for purchase of land -134580 Cash used for purchase of equipment -62520 Net cash flow used for investing activities -107590 Cash flows from (used for) financing activities: : Cash from sale of common stock 91560 Cash used for dividends -37920 Net cash flow from financing activities 53640 Net increase in cash 15160 Cash at the beginning of the year 241410 Cash at the end of the year 256570

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