Question

The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:

		Dec. 31, 20Y8		Dec. 31, 20Y7
Assets
Cash		$55,870		$68,540
Accounts receivable (net)		85,850		92,390
Inventories		122,620		114,520
Prepaid expenses		5,000		3,470
Equipment		249,820		205,170
Accumulated depreciation-equipment		(64,950)		(50,320)
	Total assets	$454,210		$433,770
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$95,380		$90,660
Mortgage note payable		0		130,130
Common stock, $1 par		14,000		9,000
Paid-in capital in excess of par-common stock		197,000		122,000
Retained earnings		147,830		81,980
	Total liabilities and stockholders’ equity	$454,210		$433,770

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:

1. Net income, $168,580.
2. Depreciation reported on the income statement, $31,660.
3. Equipment was purchased at a cost of $61,680 and fully depreciated equipment costing $17,030 was discarded, with no salvage realized.
4. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
5. 5,000 shares of common stock were issued at $16 for cash.
6. Cash dividends declared and paid, $102,730.

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.

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from (used for) operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
	$
Net cash flow used for investing activities
Cash flows from (used for) financing activities:
	$
Net cash flow used for financing activities
		$
Cash balance, January 1, 20Y8
Cash balance, December 31, 20Y8		$

Answer 1

Solution

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities:
Net income	$    1,68,580.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$       31,660.00
Changes in current operating assets and liabilities:
Decrease in accounts receivables	$         6,540.00
Increase in Inventory	$        (8,100.00)
Increase in accounts payable	$         4,720.00
Increase in prepaid expense	$          (1,530.00)
Net cash flow from operating activities		$          2,01,870.00
Cash flows from investing activities:
Purchase of Equipment	$      (61,680.00)
Net cash flow used for investing activities		$            (61,680.00)
Cash flows from financing activities:
Issue of common stock	$       80,000.00
Repayment of mortgage	$   (1,30,130.00)
Payment of Dividend	$   (1,02,730.00)
Net cash flow used for financing activities		$         (1,52,860.00)
Change in cash during year		$            (12,670.00)
Cash balance, January 1, 20Y8		$             68,540.00
Cash balance, December 31, 20Y8		$             55,870.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.