Textbook Problem

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	$ 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 (merchandise creditors	$ 205,700	$194,140
Accrued expenses payable (operating expenses	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

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

1. A. Equipment and land were acquired for cash.
2. B. There were no disposals of equipment during the year.
3. C. The investments were sold for $91,800 cash.
4. D. The common stock was issued for cash.
5. E. There was a $141,680 credit to Retained Earnings for net income.
6. F. There was a $102,000 debit to Retained Earnings for cash dividends declared.

Instructions

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.