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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem

The comparative balance sheet of Martinez Inc. for December 31, 20Y4 and 20Y3, is as follows:

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The income statement for the year ended December 31, 20Y4, is as follows:

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Additional data obtained from an examination of the accounts in the ledger for 20Y4 are 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 $588,000 cash.
  4.      d.            The common stock was issued for cash.
  5.       e.            There was a $528,000 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.

To determine

Prepare statement of cash flows using the direct method of presenting cash flows from operating activities.

Explanation

Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Working Note 1: Calculate the cash flows from operating activities.

Sales revenue$4,512,000
Less: Increase in accounts receivable(78,240)
Cash receipts from customers$4,433,760

Table (2)

Working Note 2: Calculate the cash payments for merchandise.

Cost of merchandise sold$2,352,000
Less: Increase in accounts payable(113,400)
Add: Increase in inventory30,600
Cash payments for merchandise$2,269,200

Table (3)

Working Note 3: Calculate the cash payment for operating expenses...

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