Question

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		$222,710		$208,610
Accounts receivable (net)		80,680		74,920
Inventories		227,760		221,840
Investments		0		85,940
Land		116,820		0
Equipment		251,290		196,120
Accumulated depreciation—equipment		(58,830)		(52,890)
	Total assets	$840,430		$734,540
Liabilities and Stockholders' Equity
Accounts payable		$152,120		$144,700
Accrued expenses payable		15,130		19,100
Dividends payable		8,400		6,610
Common stock, $10 par		45,380		35,990
Paid-in capital: Excess of issue price over par-common stock		170,610		99,900
Retained earnings		448,790		428,240
	Total liabilities and stockholders’ equity	$840,430		$734,540

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $77,350 cash.

The common stock was issued for cash.

There was a $55,070 credit to Retained Earnings for net income.

There was a $34,520 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

Loss on sale of investment = Cost of investment sold - Proceed from sale
Loss on sale of investment = $85,940 - $77,350
Loss on sale of investment = $8,590

Dividend paid = Beginning dividends payable + Dividends declared - Ending dividends payable
Dividend paid = $6,610 + $34,520 - $8,400
Dividend paid = $32,730

Proceed from issuance of common stock = Increase in common stock + Increase in paid-in capital
Proceed from issuance of common stock = ($45,380 - $35,990) + ($170,610 - $99,900)
Proceed from issuance of common stock = $80,100