Question

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

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

A. Net income, $190,000.

B. Depreciation reported on the income statement, $115,000.

C. Equipment was purchased at a cost of $395,000 and fully depreciated equipment costing $75,000 was discarded, with no salvage realized.

D. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.

E. 40,000 shares of common stock were issued at $15 for cash.

F. Cash dividends declared and paid, $50,000.

Complete the work sheet for statement of cash flow:

Answer 1

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	Balance	Debit	Credit	Balance
Cash	$ 100,000		$      20,000	$     80,000
Accounts receivable (net)	$ 300,000		$      25,000	$   275,000
Merchandise inventory	$ 400,000	$    110,000		$   510,000
Prepaid expenses	$    10,000	$        5,000		$     15,000
Equipment	$ 750,000	$    395,000	$      75,000	$1,070,000
Accum. depr.—equipment	$-160,000	$      75,000	$    115,000	$ -200,000
Accounts payable	$ -90,000		$      10,000	$ -100,000
Mortgage note payable	$-400,000	$    400,000		$              -
Common stock, $10 par	$-200,000		$    400,000	$ -600,000
Paid-in capital in excess of par—common stock	$-100,000		$    200,000	$ -300,000
Retained earnings	$-610,000	$      50,000	$    190,000	$ -750,000
Totals	$            -	$ 1,035,000	$ 1,035,000	$              -
Operating activities:
Net income		$    190,000
Depreciation		$    115,000
Decrease in accts. receivable		$      25,000
Increase in merchandise Inventory			$    110,000
Increase in prepaid expenses			$        5,000
Increase in accounts payable		$      10,000
Investing activities:
Purchase of equipment			$    395,000
Financing activities:
Payment of cash dividends			$      50,000
Sale of common stock		$    600,000
Payment of mortgage note Payable			$    400,000
Net decrease in cash		$      20,000
Totals		$    960,000	$    960,000