Question

The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows: 1 Dec. 31, 20Y8 Dec. 31, 20Y7 2 Assets 3 Cash $146,460.00 $179,930.00 4 Accounts receivable (net) 224,660.00 242,920.00 5 Merchandise inventory 321,290.00 299,000.00 6 Prepaid expenses 13,120.00 10,510.00 7 Equipment 654,510.00 537,990.00 8 Accumulated depreciation-equipment (170,510.00) (132,770.00) 9 Total assets $1,189,530.00 $1,137,580.00 10 Liabilities and Stockholders’ Equity 11 Accounts payable (merchandise creditors) $249,550.00 $237,970.00 12 Mortgage note payable ????0.00 335,000.00 13 Common stock, $10 par 75,000.00 25,000.00 14 Paid-in capital: Excess of issue price over par—common stock 500,000.00 330,000.00 15 Retained earnings 364,980.00 209,610.00 16 Total liabilities and stockholders’ equity $1,189,530.00 $1,137,580.00 Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows: A. Net income, $308,740 B. Depreciation reported on the income statement, $83,110 C. Equipment was purchased at a cost of $161,890 and fully depreciated equipment costing $45,370 was discarded, with no salvage realized. D. 10,000 shares of common stock were issued at $22 for cash. E. The mortgage note payable was not due until 2018 but the terms permitted earlier payment without penalty. F. Cash dividends declared and paid, $153,370 Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. Labels and Amount Descriptions Cash used for dividends Cash used for equipment Cash used for merchandise Cash used for purchase of land Cash used to retire mortgage note payable Cash from customers Cash from sale of common stock December 31, 20Y8 Decrease in cash Decrease in merchandise inventory Decrease in accounts payable Decrease in accounts receivable Decrease in prepaid expenses Depreciation For the Year Ended December 31, 20Y8 Gain on disposal of equipment Gain on sale of investments Increase in accounts payable Increase in accounts receivable Increase in cash Increase in merchandise inventory Increase in prepaid expenses Loss on disposal of equipment Loss on sale of investments Net cash flow from financing activities Net cash flow from investing activities Net cash flow from operating activities Net cash flow used for financing activities Net cash flow used for investing activities Net cash flow used for operating activities Net income Net loss Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. Score: 103/154 Yellow Dog Enterprises Inc. Statement of Cash Flows For the Year Ended December 31, 20Y8 ? 1 Cash flows from operating activities: 2 Net income ? $308,740.00 ? 3 Adjustments to reconcile net income to net cash flow from operating activities: 4 Depreciation ? 83,110.00 ? 5 Changes in current operating assets and liabilities: 6 Increase in accounts payable ? 11,580.00 ? 7 Decrease in accounts receivable ? 18,260.00 ? 8 Increase in merchandise inventory ? (22,290.00) ? 9 Increase in prepaid expenses ? (2,610.00) ? 10 net cash flow from operating activities ? $396,790.00 ? 11 12 Cash flows from (used for) investing activities: 13 Cash used for equipment ? $161,890.00 14 Net cash flow used for investing activities 116,520.00 15 16 Cash flows from (used for) financing activities: 17 Cash from sale of common stock ? $220,000.00 ? 18 Cash used to retire mortgage note payable (33,500.00) 19 Cash used for dividends 152,370.00 20 Net cash flow used for financing activities 338,870.00 21 Increase in cash $543,440.00 22 Cash at the beginning of the year 146,460.00 23 Cash at the end of the year $689,900.00 Points: 20.73 / 31 Check My Work Calculate the increases and decreases in the current asset/liability accounts over the period. How do these increases or decreases impact the amount of cash a company has? Were there any purchases or sales of noncurrent assets during the year? If there were any sales of noncurrent assets, were these noncurrent assets sold at what the company had initially paid? Or were the assets sold for more or less than the book value? Did the company engage in any activities that affected the equity or debt in their company?

Answer 1

Cash Flow Statement using the Indirect Method is as follows:

1. There are increases and decreases in the current assets and liabilities over the period and the same are included in the Operating Activities above.

2. If the Current Asset is increased, cash would be decreased and decrease in current asset increases the cash. Likewise, If the Current Liability is increased, cash would be increased, and decrease in current liability decreases the cash.

3. There are both purchase and sale of noncurrent assets.

4. Equipment costing $45,370 is sold with no salvage value that is for $0. Equipment costing $161,890 is purchased during the period.

5. Entity has paid off its mortgage notes payable and it has issued new common stock.