Exercise 12-7 Shown below are comparative balance sheets for Martinez Company. M
ID: 2535108 • Letter: E
Question
Exercise 12-7 Shown below are comparative balance sheets for Martinez Company. Martinez Company Comparative Balance Sheets December 31 2016 $ 70,268 242,744 603,666 319,400 638,800 2017 Assets Cash Accounts receivable Inventory Land Equipment Accumulated depreciation-equipment Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total $ 217,192 281,072 533,398 255,520 830,440 (210,804)(102,208) $1,906,818$1,772,670 $ 137,342 638,800 555,756 440,772 $1,906,818$1,772,670 $ 124,566 479,100 689,904 613,248Explanation / Answer
Solution:
Martinez Company
Cash Flow Statement (Indirect Method)
For the Year Ended December 31, 2017
Cash Flow from Operating Activities:
$$
$$
Net Income
$297,042
Adjustments to convert net income to cash basis
+
Depreciation Expenses (Non cash item)
$108,596
-
Increase in Accounts Receivable (281072 - 242744)
-$38,328
+
Decrease in Inventories (603666 - 533398)
$70,268
-
Decrease in Accounts Payable (137342 - 124566)
-$12,776
Net Cash Provided by Operative Activities
$424,802
Cash Flow from Investing Activities:
-
Purchase of Equipment (830440 - 638800)
-$191,640
+
Sale of Land (319400 - 255520)
$63,880
Net Cash used by Investing Activities
-$127,760
Cash Flow from Financing Activities:
-
Cash paid for redemption of bonds
-$159,700
+
Proceeds from Issuance of Common Stock (689904 - 555756)
$134,148
-
Cash Dividend Paid
-$124,566
Net Cash used by Financing Activities
-$150,118
Net Increase/(Decrease) in Cash and Cash Equivalents
$146,924
Cash and Cash Equivalents at the beginning of the year
$70,268
Cash and Cash Equivalents at the end of the year
$217,192
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Martinez Company
Cash Flow Statement (Indirect Method)
For the Year Ended December 31, 2017
Cash Flow from Operating Activities:
$$
$$
Net Income
$297,042
Adjustments to convert net income to cash basis
+
Depreciation Expenses (Non cash item)
$108,596
-
Increase in Accounts Receivable (281072 - 242744)
-$38,328
+
Decrease in Inventories (603666 - 533398)
$70,268
-
Decrease in Accounts Payable (137342 - 124566)
-$12,776
Net Cash Provided by Operative Activities
$424,802
Cash Flow from Investing Activities:
-
Purchase of Equipment (830440 - 638800)
-$191,640
+
Sale of Land (319400 - 255520)
$63,880
Net Cash used by Investing Activities
-$127,760
Cash Flow from Financing Activities:
-
Cash paid for redemption of bonds
-$159,700
+
Proceeds from Issuance of Common Stock (689904 - 555756)
$134,148
-
Cash Dividend Paid
-$124,566
Net Cash used by Financing Activities
-$150,118
Net Increase/(Decrease) in Cash and Cash Equivalents
$146,924
Cash and Cash Equivalents at the beginning of the year
$70,268
Cash and Cash Equivalents at the end of the year
$217,192
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