Statement of cash flows—direct method applied to OBJ. 3 The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 2016 and 2015, is:

Dec. 31, 2016 Dec. 31, 2015 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,211,760 $ 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, $1 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 Earnings for cash dividends declared.
Instructions Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.
Cases & Projects