Question

The Murdock Corporation reported the following balance sheet data for 2018 and 2017:
  

	2018				2017
Cash	$	97,355			$	33,755
Available-for-sale debt securities (not cash equivalents)		24,500				103,000
Accounts receivable		98,000				84,450
Inventory		183,000				161,200
Prepaid insurance		3,120				3,800
Land, buildings, and equipment		1,286,000				1,143,000
Accumulated depreciation		(628,000	)			(590,000	)
Total assets	$	1,063,975			$	939,205
Accounts payable	$	92,540			$	166,670
Salaries payable		27,200				33,500
Notes payable (current)		41,200				93,000
Bonds payable		218,000				0
Common stock		300,000				300,000
Retained earnings		385,035				346,035
Total liabilities and shareholders' equity	$	1,063,975			$	939,205

  
Additional information for 2018:

• (1.) Sold available-for-sale debt securities costing $78,500 for $84,800.
• (2.) Equipment costing $20,000 with a book value of $6,800 was sold for $8,700.
• (3.) Issued 6% bonds payable at face value, $218,000.
• (4.) Purchased new equipment for $163,000 cash.
• (5.) Paid cash dividends of $29,000.
• (6.) Net income was $68,000.

Required:
Prepare a statement of cash flows for 2018 in good form using the indirect method for cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign.

PREPARE A STATEMENT OF CASH FLOW

Answer 1

The Murdock Corporation
Statement of Cash Flow
For the Year Ended Dec 31, 2018
Cash flows from operating activities:
Net Income	$68,000
Adjustments to reconcile net loss to net cash flow from operating activities:
Depreciation expense	$51,200
Gain on sale of securities	-$6,300
Gain on sale of equipment	-$1,900
Changes in current operating assets and liabilities:
Increase in accounts receivable	-$13,550
Increase in inventory	-$21,800
Decrease in prepaid insurance	$680
Decrease in accounts payable	-$74,130
Decrease in salaries payable	-$6,300
Decrease in notes payable	-$51,800
Net Cash provided by operating activities		-$55,900
Cash Flow from Investing Activities
Proceeds from the sale of securities	$84,800
Proceeds from the sale of equipment	$8,700
Purchase of equipment	-$163,000
Net cash used in investing activities		-$69,500
Cash Flow from Financing Activities
Proceeds from bonds issued	$218,000
Dividends Paid	-$29,000
Net Cash provided by financing activities:		$189,000
Net increase/decrease in cash held		$63,600
Cash at the beginning of the year		$33,755
Cash at the end of the year		$97,355