The Murdock Corporation reported the following balance sheet data for 2018 and 2

Question

The Murdock Corporation reported the following balance sheet data for 2018 and 2017:
  

  
Additional information for 2018:

(1.) Sold available-for-sale debt securities costing $72,000 for $77,000.

(2.) Equipment costing $20,000 with a book value of $5,500 was sold for $6,750.

(3.) Issued 6% bonds payable at face value, $205,000.

(4.) Purchased new equipment for $150,000 cash.

(5.) Paid cash dividends of $22,500.

(6.) Net income was $55,000.

Required:
Prepare a statement of cash flows for 2018 in good form using the indirect method for cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign.)
  

2018 2017 Cash $ 82,925 $ 25,955 Available-for-sale debt securities (not cash equivalents) 18,000 90,000 Accounts receivable 85,000 72,750 Inventory 170,000 149,500 Prepaid insurance 1,950 2,500 Land, buildings, and equipment 1,260,000 1,130,000 Accumulated depreciation (615,000 ) (577,000 ) Total assets $ 1,002,875 $ 893,705 Accounts payable $ 80,840 $ 153,670 Salaries payable 22,000 27,000 Notes payable (current) 29,500 80,000 Bonds payable 205,000 0 Common stock 300,000 300,000 Retained earnings 365,535 333,035 Total liabilities and shareholders' equity $ 1,002,875 $ 893,705

Explanation / Answer

MURDOCK CORPORATION Statement of Cash Flows For the Year Ended December 31, 2018 Cash flows from operating activities: Net Income $55,000.00 Less : Profit on sale of Debt Securities( $77000-$-72000) -$5,000.00 Less : Profit on sale of Equipment ( $6750-$5500) -$1,250.00 Adjustment for Non Cash Effect Add : Depreciation $52,500.00 Changes in Operating Assests & Liabilities Less : Increase in A/C receivable -$12,250.00 Less : Increase in Inventory -$20,500.00 Add : Decrease in Prepaid Insurance $550.00 Add : Decrease in A/c Payable -$72,830.00 Add : Decrease in Salary Payable -$5,000.00 Add : Decrease in Notes Payable -$50,500.00 Net Cash from Operating Activities-(A) -$59,280.00 Cash Flow from investing Actvites Add :Sale of debt Seurities $77,000.00 Less : Purchase of Land, Building and Equip -$150,000.00 Add : Sale of Land, Building and Equip $21,250.00 Less : Accumulated Depreciation of sale of Equipment -$14,500.00 Net Cash Flow from investing Actvites- ( B) -$66,250.00 Cash Flow from Financing Actvites Less : Dividend Paid -$22,500.00 Add : Bonds Payable $205,000.00 Net Cash Flow from investing Actvites- ( C) $182,500.00 Net Cash Flow( A+B+c) $56,970.00 Opening Cash $25,955.00 Closing Cash $82,925.00

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