Answered: Statement of Cash Flows—Indirect Method…

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	$294,210		$276,210
Accounts receivable (net)	106,580		99,200
Inventories	300,890		293,720
Investments	0		113,790
Land	154,320		0
Equipment	331,960		259,680
Accumulated depreciation—equipment	(77,720)		(70,030)
Total assets	$1,110,240		$972,570

Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)	$200,950		$191,600
Accrued expenses payable (operating expenses)	19,980		25,290
Dividends payable	11,100		8,750
Common stock, $10 par	59,950		47,660
Paid-in capital in excess of par—common stock	225,380		132,270
Retained earnings	592,880		567,000
Total liabilities and stockholders’ equity	$1,110,240		$972,570

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 $133,130 cash.
The common stock was issued for cash.
There was a $71,590 credit to Retained Earnings for net income.
There was a $45,710 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	$fill in the blank 2
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	fill in the blank 4
Gain on sale of investments	fill in the blank 6
Changes in current operating assets and liabilities:
Increase in accounts receivable	fill in the blank 8
Increase in inventories	fill in the blank 10
Increase in accounts payable	fill in the blank 12
Decrease in accrued expenses payable	fill in the blank 14
Net cash flow from operating activities		$fill in the blank 15
Cash flows from (used for) investing activities:
Cash received from sale of investments	$fill in the blank 17
Cash paid for purchase of land	fill in the blank 19
Cash paid for purchase of equipment	fill in the blank 21
Net cash flow used for investing activities		fill in the blank 22
Cash flows from (used for) financing activities:
Cash received from sale of common stock	$fill in the blank 24
Cash paid for dividends	fill in the blank 26
Net cash flow from financing activities		fill in the blank 27
		$fill in the blank 29
Cash balance, January 1, 20Y9		fill in the blank 30
Cash balance, December 31, 20Y9		$fill in the blank 31

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