Question

1. 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, 20Y8
   Assets
   Cash		$229,710		$214,170
   Accounts receivable (net)		83,210		76,920
   Inventories		234,910		227,760
   Investments		0		88,230
   Land		120,490		0
   Equipment		259,180		201,350
   Accumulated depreciation—equipment		(60,680)		(54,300)
   	Total assets	$866,820		$754,130
   Liabilities and Stockholders' Equity
   Accounts payable		$156,890		$148,560
   Accrued expenses payable		15,600		19,610
   Dividends payable		8,670		6,790
   Common stock, $10 par		46,810		36,950
   Paid-in capital: Excess of issue price over par-common stock		175,960		102,560
   Retained earnings		462,890		439,660
   	Total liabilities and stockholders’ equity	$866,820		$754,130

   Additional data obtained from an examination of the accounts in the ledger for 20Y9 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 $79,410 cash.
   4. The common stock was issued for cash.
   5. There was a $58,670 credit to Retained Earnings for net income.
   6. There was a $35,440 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 outflows, 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:
   	$
   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 from financing activities
   		$
   Cash at the beginning of the year
   Cash at the end of the year		$

Answer 1

Statement of cashflow indirect method
Particulars	Amount
Net income for the period	58,670
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation for the year	$6,380
loss on sale of investments (sale proceeds - investments as on dec 2018) (79410-88230)	8820
Changes in current operating assets and liabilities:
Increase in trade receivable	($6,290)
Increase in inventory	($7,150)
Increase in trade payable	$8,330
decrease in accrued expense payable	($4,010)
Net cash flow from operating activities-A	64,750
Cash flows from (used for) investing activities:
Purchase of land and equipment, (sum of changes in paid in equipment and land)	($178,320)
Proceeds from sales of investment	79410
Net cash flow used for investing activities-B	($98,910)
Cash flows from (used for) financing activities:
Proceeds from issue of shares- (sum of changes in paid in capital and common stock)	$83,260
Payment of dividend Note 1	-33560
Net cash flow from financing activities-C	$49,700
Cash at the beginning of the year	$214,170
Increase in cash during the year -A+B+C	$15,540
Cash at the end of the year	$229,710
Note 1
Dividend declared during the year	-35440
opening dividend payable on dec 2008	-6,790
closing dividend payable on dec 2009	8,670
DIVIDEND paid during year	-33560

	Dec. 31, 20Y9	Dec. 31, 20Y8
Assets				Difference
Cash	$229,710		$214,170	$15,540
Accounts receivable (net)	83,210		76,920	$6,290
Inventories	234,910		227,760	$7,150
Investments	0		88,230	($88,230)
Land	120,490		0	$120,490
Equipment	259,180		201,350	$57,830
Accumulated depreciation—equipment	-60,680		-54,300	($6,380)
Total assets	$866,820		$754,130
Liabilities and Stockholders' Equity
Accounts payable	$156,890		$148,560	$8,330
Accrued expenses payable	15,600		19,610	($4,010)
Dividends payable	8,670		6,790	$1,880
Common stock, $10 par	46,810		36,950	$9,860
Paid-in capital: Excess of issue price over par-common stock	175,960		102,560	$73,400
Retained earnings	462,890		439,660	$23,230
Total liabilities and stockholders’ equity	$866,820		$754,130