Question

The Murdock Corporation reported the following balance sheet data for 2016 and 2015:

  

	2016			2015
Cash	$	96,245		$	33,155
Available-for-sale securities (not cash equivalents)		24,000			102,000
Accounts receivable		97,000			83,550
Inventory		182,000			160,300
Prepaid insurance		3,030			3,700
Land, buildings, and equipment		1,284,000			1,142,000
Accumulated depreciation		(627,000	)		(589,000	)
Total assets	$	1,059,275		$	935,705
Accounts payable	$	91,640		$	165,670
Salaries payable		26,800			33,000
Notes payable (current)		40,300			92,000
Bonds payable		217,000			0
Common stock		300,000			300,000
Retained earnings		383,535			345,035
Total liabilities and shareholders' equity	$	1,059,275		$	935,705

  

Additional information for 2016:

Sold available-for-sale securities costing $78,000 for $84,200.

Equipment costing $20,000 with a book value of $6,700 was sold for $8,550.

Issued 6% bonds payable at face value, $217,000.

Purchased new equipment for $162,000 cash.

Paid cash dividends of $28,500.

Net income was $67,000.

Required:

Prepare a statement of cash flows for 2016 in good form using the indirect method for cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Murdock Corporation
Statement of Cash Flows (Partial)
Cash flows from operating activities
Net Income	67,000
Adjustment for noncash effects:
Depreciation expense	51,300
Gain on sale of securities	(6,200)
Gain on sale of equipment	(1,850)
Changes in current assets and current liabilities
Increase in accounts receivable, net	(13,450)
Increase in inventory	(21,700)
Decrease in prepaid expense	670
Decrease in accounts payable	(74,030)
Decrease in salaries payable	(6,200)
Decrease in note payable	(51,700)
Net cash flow operating activities		(56,160)