Chapter 16, Problem 16.5BPR

Statement of cash flows—direct method applied to PR 16–18

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

	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)	(184,320)
Total assets............................................	$1,211,760	$901,680
Liabilities and Stockholders' Equity
Accounts payable.........................................	$ 205,700	$194,140
Accrued expenses payable.................................	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 follows:

Sales...........................................		$2,023,898
Cost of merchandise 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:

a. Equipment and land were acquired for cash.

b. There were no disposals of equipment during the year.

c. The investments were sold for $91,800 cash.

d. The common stock was issued for cash.

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.