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Page 1 of 2 Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $185,000 recorded on equipment and a building amounted to $96,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: . Depreciation End of Year Beginning of Year Cash Accounts receivable (net) Inventories Prepaid expenses Accounts payable (merchandise creditors) Salaries payable s75,900 84,550 186,200 3,600 91,500 7,200 $86,150 90,000 175,000 4,500 110,000 4,000 a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments Statement of Cash Flows (partial) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Decrease in accounts receivable Decrease in inventories × 185,000 96,000 -10.250 × X. -5,450 × Net cash flow from operating activities
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, 20YS Assets Cash Accounts receivable (net) Inventories Investments Land Equipment Accumulated depreciation-equipment $70,720 207,230 298,520 0 295,800 438,600 (99,110) $47,940 188,190 289,850 102,000 0 358,020 Total assets $901,680 Liabilities and Stockholders Equity Accounts payable (merchandise creditors) Accrued expenses payable (operating expenses) Dividends payable Common stock, $1 par Paid-in capital: Excess of issue price over par-common stock Retained earnings $205,700 30,600 25,500 $194,140 26,860 20,400 202,000 4,000 102,000 354,000 393,960 $1,211,760 354,280 Total liabilities and stockholders equity $901,680 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 $141,680 credit to Retained Earnings for net income. f. There was a $102,000 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 out flows, 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 operating activities
Net income s 141,680 Adjustments to recondile net income to net cash flow from operating activities: Depreciation 14,790 Loss on sale of investments 10,200 Changes in current operating assets and liabilities: 19,040 -8,670 11,560 3,740 Increase in accounts receivable Increase in inventories Increase in accounts payable Increase in accrued expenses payable Net cash flow from operating activities 154,260 Cash flows from investing activities: Cash received from sale of investments Net cash flow used for investing activities Cash flows from financing activities: Net cash flow from financing activities Cash at beginning of the year Cash at end of the year more Check My Work uses remaining.
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Statement of Ca sh Flows (Partial) Cash flows from Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Changes in current operating assets and liabilities Decrease in accounts receivable Increase in inventories Decrease in prepaid expenses Decrease in accounts payable Increase in salaries payable Net cash flow from Operating Activities 185000 96000 5450 -11200 900 -18500 3200 260850

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