Chapter 13, Problem 13.5BPR

Statement of cash flows—direct method applied to PR 13–1B

The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is:

	Dec. 31, 20Y9	Dec. 31, 20Y8
Assets
Cash	$ 70,720		$ 47,940
Accounts receivable (net)	207,230		188,190
Inventories	298,520		289,850
Investments	0		102,000
Land	295,800		0
Equipment	438,600		358,020
Accumulated depreciation—equipment	(99,110)		(84,320)
Total assets	$ 1,211,760		$ 901,680
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)..................	$ 205,700		$ 194,140
Accrued expenses payable (operating expenses)	30,600		26,860
Dividends payable	25,500		20,400
Common stock. $1 par	202,000		102,000
Paid-in capital: Excess of issue price over par—common stock	354,000		204,000
Retained earnings	393,960		354,280
Total liabilities and stockholders' equity	$ 1,211,760	$	901,680
The income statement for the year ended December 31,20Y9, is as fallow s:
Sales		$2,023,898
Cost of goods sold		1,245,476
Gross profit		$ 778,422
Operating expenses:
Depreciation expense	$ 14,790
Other operating expenses	517,299
Total operating expenses		532,089
Operating income		$ 246,333
Other expenses:
Loss on sale of investments		(10,200)
Income before income tax		$ 236,133
Income tax expense		94,453
Net income		$ 141,680

Additional data obtained from an examination of the- accounts in the ledger for 20Y9 are as follows:

1. A. Equipment and land were acquired for cash.
2. B. There were no disposals of equipment during the year.
3. C. The investments were sold for $91,800 cash.
4. D. The common stock was issued for cash.
5. E. There was a $ 102,000 debit to Retained Earnings for cash dividends declared.

Instructions

Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.