Statement of Cash Flows—Indirect MethodThe comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows: Dec. 31, 20Y9Dec. 31, 20Y8Assets Cash$223,150 $209,500 Accounts receivable (net)80,840 75,240 Inventories228,220 222,770 Investments0 86,310 Land117,050 0 Equipment251,780 196,960 Accumulated depreciation—equipment(58,950) (53,110) Total assets$842,090 $737,670 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors)$152,420 $145,320 Accrued expenses payable (operating expenses)15,160 19,180 Dividends payable8,420 6,640 Common stock, $10 par45,470 36,150 Paid-in capital in excess of par—common stock170,940 100,320 Retained earnings449,680 430,060 Total liabilities and stockholders’ equity$842,090 $737,670 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 $100,980 cash.The common stock was issued for cash.There was a $54,290 credit to Retained Earnings for net income.There was a $34,670 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 outflows, cash payments, decreases in cash, or any negative adjustments.Merrick Equipment Co.Statement of Cash FlowsFor the Year Ended December 31, 20Y9Cash flows from (used for) operating activities:Net income Adjustments to reconcile net income to net cash flow from operating activities:Depreciation Gain 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 activitiesCash flows from (used for) investing activities:Cash received from sale of investments Cash paid for purchase of land Cash paid for purchase of equipment Net cash flow used for investing activitiesCash flows from (used for) financing activities:Cash received from sale of common stock Cash paid for dividends Net cash flow from financing activitiesNet increase in cash Cash balance, January 1, 20Y9Cash balance, December 31, 20Y9

Answered: Required: Prepare a statement of cash…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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	$223,150		$209,500
Accounts receivable (net)	80,840		75,240
Inventories	228,220		222,770
Investments	0		86,310
Land	117,050		0
Equipment	251,780		196,960
Accumulated depreciation—equipment	(58,950)		(53,110)
Total assets	$842,090		$737,670

Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)	$152,420		$145,320
Accrued expenses payable (operating expenses)	15,160		19,180
Dividends payable	8,420		6,640
Common stock, $10 par	45,470		36,150
Paid-in capital in excess of par—common stock	170,940		100,320
Retained earnings	449,680		430,060
Total liabilities and stockholders’ equity	$842,090		$737,670

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 $100,980 cash.
The common stock was issued for cash.
There was a $54,290 credit to Retained Earnings for net income.
There was a $34,670 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 outflows, 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 (used for) operating activities:

Net income

Adjustments to reconcile net income to net cash flow from operating activities:

Depreciation

Gain 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 sale of investments

Cash paid for purchase of land

Cash paid for purchase of equipment

Net cash flow used for investing activities

Cash flows from (used for) financing activities:

Cash received from sale of common stock

Cash paid for dividends

Net cash flow from financing activities

Net increase in cash

Cash balance, January 1, 20Y9

Cash balance, December 31, 20Y9

Expert Solution

Cash flow statement

Cash flow statement portrays the cash inflow and outflow in an entity. It forms an important element in the financial report serving the interest of stakeholders by providing the information regarding the operational efficiency of the entity.

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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 outflows, cash payments, decreases in cash, or any negative adjustments.