Concept explainers
Statement of cash flows—direct method applied to PR 13–1B
The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is:
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 |
(99,110) | (84,320) | ||
Total assets | $ 1,211,760 | $ 901,680 | ||
Liabilities and |
||||
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 | ||
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 fallow s: | ||||
Sales | $2,023,898 | |||
Cost of goods 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:
- A. Equipment and land were acquired for cash.
- B. There were no disposals of equipment during the year.
- C. The investments were sold for $91,800 cash.
- D. The common stock was issued for cash.
- E. There was a $ 102,000 debit to Retained Earnings for cash dividends declared.
Instructions
Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.
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- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
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