Question

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

   		Dec. 31, 20Y8		Dec. 31, 20Y7
   Assets
   Cash		$49,350		$60,220
   Accounts receivable (net)		75,830		81,180
   Inventories		108,320		100,620
   Prepaid expenses		4,410		3,050
   Equipment		220,660		180,280
   Accumulated depreciation-equipment		(57,370)		(44,210)
   	Total assets	$401,200		$381,140
   Liabilities and Stockholders' Equity
   Accounts payable (merchandise creditors)		$84,250		$79,660
   Mortgage note payable		0		114,340
   Common stock, $1 par		13,000		8,000
   Paid-in capital: Excess of issue price over par-common stock		182,000		107,000
   Retained earnings		121,950		72,140
   	Total liabilities and stockholders’ equity	$401,200		$381,140

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

   1. Net income, $127,510.
   2. Depreciation reported on the income statement, $28,120.
   3. Equipment was purchased at a cost of $55,340, and fully depreciated equipment costing $14,960 was discarded, with no salvage realized.
   4. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
   5. 5,000 shares of common stock were issued at $16 for cash.
   6. Cash dividends declared and paid, $77,700.

   Required:

   Prepare a statement of cash flows, using the indirect method of presenting The section of the statement of cash flows that reports the cash transactions affecting the determination of net income.cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

   Yellow Dog Enterprises Inc.
   Statement of Cash Flows
   For the Year Ended December 31, 20Y8
   Cash flows from operating activities:
   Net income Common stock Depreciation Inventory Net income Prepaid expenses Retained earnings	$
   Adjustments to reconcile net income to net cash flow from operating activities:
   Depreciation Cash paid for dividends Decrease in accounts receivable Depreciation Increase in accounts receivable Net income Retained earnings
   Changes in current operating assets and liabilities:
   Decrease in accounts receivable Decrease in accounts payable Decrease in accounts receivable Decrease in inventory Depreciation Increase in accounts receivable
   Increase in inventory Decrease in accounts payable Decrease in inventory Decrease in prepaid expenses Depreciation Increase in accounts receivable Increase in inventory
   Increase in prepaid expenses Decrease in accounts payable Decrease in inventory Decrease in prepaid expenses Increase in prepaid expenses
   Increase in accounts payable Decrease in accounts payable Decrease in prepaid expenses Depreciation Increase in accounts payable Net income Retained earnings
   Net cash flow from operating activities		$
   Cash flows from investing activities:
   Cash paid for equipment Cash paid for common stock Cash paid for equipment Cash paid for dividends Cash paid for inventory Cash paid for prepaid expenses Cash paid to retire mortgage note	$
   Net cash flow used for investing activities
   Cash flows from financing activities:
   Cash received from sale of common stock Cash received from customers Cash received from depreciation Cash received from dividends Cash received from net income Cash received from retained earnings Cash received from sale of common stock	$
   Cash paid for dividends Cash paid for accounts payable Cash paid for common stock Cash paid for dividends Cash paid for equipment Cash paid for inventory Cash paid for prepaid expenses
   Cash paid to retire mortgage note payable Cash paid for accounts payable Cash paid for accumulated depreciation Cash paid for common stock Cash paid for depreciation Cash paid for inventories Cash paid to retire mortgage note payable
   Net cash flow used for financing activities
   Change in cash Cash paid for accounts payable Cash paid for accumulated depreciation Cash paid for common stock Cash paid for depreciation Cash paid for inventories Change in cash		$
   Cash at the beginning of the year
   Cash at the end of the year

Answer 1

Solution

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities:
Net income	$    1,27,510.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$       28,120.00
Changes in current operating assets and liabilities:
Decrease in accounts receivables	$         5,350.00
Increase in Inventory	$        (7,700.00)
Increase in accounts payable	$         4,590.00
Increase in prepaid expense	$          (1,360.00)
Net cash flow from operating activities		$          1,56,510.00
Cash flows from investing activities:
Purchase of Equipment	$      (55,340.00)
Net cash flow used for investing activities		$            (55,340.00)
Cash flows from financing activities:
Issue of common stock	$       80,000.00
Repayment of mortgage	$   (1,14,340.00)
Payment of Dividend	$      (77,700.00)
Net cash flow used for financing activities		$         (1,12,040.00)
Change in cash during year		$            (10,870.00)
Cash at the beginning of the year		$             60,220.00
Cash at the end of the year		$             49,350.00