The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y
ID: 2436258 • Letter: T
Question
The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:
A) Net income, $190,000.
B) Depreciation reported on the income statement, $115,000.
C) Equipment was purchased at a cost of $395,000 and fully depreciated equipment costing $75,000 was discarded, with no salvage realized.
D) The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
E) 40,000 shares of common stock were issued at $15 for cash.
F) Cash dividends declared and paid, $50,000.
Instructions:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
Explanation / Answer
Cash flow indirect method Cash flow from operating activities Net income 190000 Adjustments to reconcile the net income Depreciation expense 115000 Changes in current asset and liabilities Decrease in accounts receivable 25000 Increase in Inventory -110000 Increase in prepaid expense -5000 Increase in accounts payable 10000 35000 Cash flow from operating activities 225000 Cash flow from Investing activities Equipment purchased -395000 Cash flow from Investing activities -395000 Cash flow from Financing activities Paid in capital in excess 200000 Common stock 400000 Dividend -50000 Bonds payable -400000 Cash flow from Financing activities 150000 Net Cash and cash equivalent -20000 Add Beginning cash and cash equivalent 100000 Ending cash and cash equivalent 80000