The 2018 and 2017 comparative balance sheets and 2018 income statement of Mercedes Supply Corp. follow:

Mercedes Supply had no noncash investing and financing transactions during 2018. During the year, there were no sales of land or equipment, no payment of notes payable, no retirements of stock, and no treasury stock transactions.

Requirements

1. Prepare Mercedes Supply’s 2018 statement of cash flows. Use the indirect method to format operating activities.

2. How can the concepts used in this problem help you evaluate an investment?

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A1 Mercedes Supply Corp. Comparative Balance Sheets December 31, 2017 2018 Increase 2 (Decrease) 3 4 Current assets: Cash and cash equivalents Accounts receivable Inventories $ 17,600 $ 38,500 48,200 1,600 1,000 $ 16,600 43,500 (5,000) 47,000 1,200 4,800 (3,200) Prepaid expenses 8 9 Plant assets: Land 23,700 49,400 $ 230,800 $ 169,400 $ 61,400 10 61,700 63,200 38,000 13,800 Equipment, net 11 12 Total assets 13 Current liabilities: Accounts payable 31,300 $ 13,000 24,500 4,700 8,000 (3,200) $ 36,000 $ 21,000 21,300 14 Salary payable Other accrued liabilities 17 Long-term liabilities: 15 16 Notes payable 18 22,000 56,000 34,000 19 Stockholders' equity: Common stock, no-par 20 63,700 2,900 $ 230,800 $ 169,400 $ 61,400 88,500 8,000 24,800 5,100 Retained earnings 21 22 Total liabilities and stockholders' equity 23 A1 Mercedes Supply Corp. Income Statement Year Ended December 31, 2018 2 Revenues: Sales revenue 4 Expenses: Cost of goods sold Salary expense Depreciation expense Other operating expense 9. $ 440,000 $ 185,500 76,700 14,600 50,600 25,000 28,800 Interest expense 10 Income tax expense 11 Total expenses 12 Net income 13 381,200 $ 58,800