Chapter 14, Problem 14.5BPR

Statement of cash flows—direct method applied to PR 14-1B

The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 2016 and 2015, is:

	Dec. 31,2016	Dec. 31.201S
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 depreciation—equipment	(99,110)		(84,320)
Total assets	$1,2’1,760	$	901,680
Liabilities and Stockholders' Equity
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. Si par.	202,000		102,000
Paid in capital: Excess of issue price over par—common stock	354,000		204,000
Retained earnings	393,960		354,280
Total liabilities and stockholders’ equity	$1,211,760	$	901,680

The income statement for the year ended December 31, 2016, is as follows:

Sales-		$2,023,898
Cost of merchandise 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 2016 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 Laming for cash dividends declared. Instructions

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