Question

Statement of Cash Flows—Direct Method

The comparative balance sheet of Martinez Inc. for December 31, 20Y4 and 20Y3, is as follows:

		Dec. 31, 20Y4		Dec. 31, 20Y3
Assets
Cash		$661,920		$683,100
Accounts receivable (net)		992,640		914,400
Inventories		1,394,400		1,363,800
Investments		0		432,000
Land		960,000		0
Equipment		1,224,000		984,000
Accumulated depreciation—equipment		(481,500)		(368,400)
Total assets		$4,751,460		$4,008,900
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$1,080,000		$966,600
Accrued expenses payable (operating expenses)		67,800		79,200
Dividends payable		100,800		91,200
Common stock, $5 par		130,000		30,000
Paid-in capital in excess of par—common stock		950,000		450,000
Retained earnings		2,422,860		2,391,900
Total liabilities and stockholders' equity		$4,751,460		$4,008,900

The income statement for the year ended December 31, 20Y3, is as follows:

Sales					$4,512,000
Cost of goods sold					(2,352,000)
Gross profit					$2,160,000
Operating expenses:
	Depreciation expense		$113,100
	Other operating expenses		1,344,840
		Total operating expenses			(1,457,940)
Operating income					$702,060
Other revenue:
		Gain on sale of investments			156,000
Income before income tax					$858,060
Income tax expense					(299,100)
Net income					$558,960

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

1. Equipment and land were acquired for cash.
2. There were no disposals of equipment during the year.
3. The investments were sold for $588,000 cash.
4. The common stock was issued for cash.
5. There was a $528,000 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the direct 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.

Martinez Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y4
Cash flows from (used for) operating activities:
	$
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 from financing activities
		$
Cash balance, January 1, 20Y4
Cash balance, December 31, 20Y4		$

Answer 1

Martinez Inc. Statement of Cash flows for the year Firded Wecember 31, 2014 I Cash flow from operating_Activities y Cash receind from Customers $4433760 Deduct: Cash payments för merchandise 142269200 Cash Payment for Operating expenses $1356240 - Cash payment for income taxes $0.99,100 ($3984540) Net Cash flow from operating Activities $509,290 | Cash flow from investing Activities in Cash creceived from Sale of investments $588,000 I Less! Cash paid for land 1 ($960,000) ... Cest paid for Equipment |($ 940,000) I Net Cash flow used for Investing Activities $61.9,000) Cash How from financing Activities, - Cash received from Sall of Common stock I Less: Cash paid for dividends Meet Cash flow from financing Activities 4600000 ($518,400) $81,600 Decrease in Cash Adds Cash at the beginning of the year Cash at the end of the Year $21,180) $683,100 $ 661,920

working noter 1 Cash creceived from Customers $45/2000 - $78,840 = $4,433,760 2. Cash payment for merchandise = $2352000 + $ 30,600 - $ 113, 400 $4,269, loo 3. Cash payment for operating Expenses = $1344840 + $ 11400 - $1356240 4. Dividend Raid + $528,000 of '$ 91, 200 - $ 100, 800 C OD $518,400
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