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The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is as follows: The income statement for the year ended December 31, 20Y9, is as follows: 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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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 16, Problem 5PB
Textbook Problem
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The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is as follows:

Chapter 16, Problem 5PB, The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is as follows: , example  1

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

Chapter 16, Problem 5PB, The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is as follows: , example  2

Additional data obtained from an examination of the accounts in the ledger for 20Y9 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 $91,800 cash.
  4.       d.            The common stock was issued for cash.
  5.        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.

To determine

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

Explanation of Solution

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$2,023,898
Less: Increase in accounts receivable(19,040)
Cash receipts from customers$2,004,858

Table (3)

Working Note 2:

Calculate the cash payments for merchandise.

Cost of goods sold$1,245,476
Less: Increase in accounts payable(11,560)
Add: Increase in inventories8,670
Cash payments for merchandise$1,242,586

Table (4)

Working Note 3:

Calculate the cash payment for operating expenses...

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Chapter 16 Solutions

Financial Accounting
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