Question

Statement of Cash Flows—Direct Method Applied to PR 16-1B

The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is as follows:

       Dec. 31, 20Y9        Dec. 31, 20Y8
Assets          
Cash $70,720     $47,940  
Accounts receivable (net) 207,230     188,190  
Inventories 298,520     289,850  
Investments 0     102,000  
Land 295,800     0  
Equipment 438,600     358,020  
Accumulated depreciation—equipment (99,110)     (84,320)  
Total assets $1,211,760     $901,680  
Liabilities and Stockholders' Equity
Accounts payable $205,700     $194,140  
Accrued expenses payable 30,600     26,860  
Dividends payable 25,500     20,400  
Common stock, $1 par 202,000     102,000  
Paid-in capital: Excess of issue price over par—common stock 354,000     204,000  
Retained earnings 393,960     354,280  
Total liabilities and stockholders' equity $1,211,760     $901,680  

The income statement for the year ended December 31, 20Y9, is as follows:

Sales   $2,023,898
Cost of merchandise sold   1,245,476
Gross profit   $778,422
Operating expenses:    
Depreciation expense $14,790  
Other operating expenses 517,299  
   Total operating expenses   532,089
Operating income   $246,333
Other expenses:    
Loss on sale of investments   (10,200)
Income before income tax   $236,133
Income tax expense   94,453
Net income   $141,680

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 $91,800 cash.
  4. The common stock was issued for cash.
  5. There was a $102,000 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the direct 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:    
Cash received from customers  $fill in the blank 2  
Cash payments for merchandise  fill in the blank 4  
Cash payments for operating expenses  fill in the blank 6  
Cash payments for taxes  fill in the blank 8  
Net cash flow from operating activities   $fill in the blank 9
Cash flows from (used for) investing activities:    
Cash from sale of investments  $fill in the blank 11  
Cash used for purchase of land  fill in the blank 13  
Cash used for purchase of equipment  fill in the blank 15  
Net cash flow used for investing activities   fill in the blank 16
Cash flows from (used for) financing activities:    
Cash from sale of common stock  $fill in the blank 18  
Cash used for dividends  fill in the blank 20  
Net cash flow from financing activities   fill in the blank 21
Increase in cash    $fill in the blank 23
Cash at the beginning of the year   fill in the blank 24
Cash at the end of the year   $fill in the blank 25

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Cash Flow Statements

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