P5-3 Preparing a Statement of Cash Flows (Indirect Method) LO5-2, 5-7 The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below: MIKOS INC. Comparative Statements of Financial Position December 31 2018 2017 Assets Cash $ 9,300 $ 17,300 Short-term investments 50,100 23,900 Accounts receivable 69,500 27,200 Inventories, at cost 54,600 40,300 Prepaid expenses 4,300 6,600 Land 46,200 71,500 Property, plant, and equipment, net 281,200 180,500 Intangible assets 24,300 28,600 $ 539,500 $395,900 Liabilities and Shareholders' Equity Accounts payable Income tax payable Accrued liabilities Long-term notes payable Contributed capital Retained earnings $ 17,300 $ 40,600 6,600 1,300 10,300 -0- 113,000 156,000 206,000 61,500 186,300 136,500 $ 539,500 $395,900 $ 859,000 MIKOS INC. Statement of Earnings For the Year Ended December 31, 2018 Sales Cost of sales Amortization expenseintangible assets Depreciation expense property, plant, and equipment Operating expenses Interest expense $ 433,000 4,300 33,300 224,000 12,300 706,900 Earnings before income taxes Income tax expense 152, 100 45,630 Net earnings $ 106,470 Additional information is as follows: a. Land was sold for cash at its carrying amount. b. The short-term investments will mature in February 2019. C. Cash dividends were declared and paid in 2018. d. New equipment with a cost of $166,300 was purchased for cash, and old equipment was sold at its carrying amount. e. Long-term notes of $11,500 were paid in cash, and notes of $31,500 were converted to shares. Required: 1. Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. (Negative answers should be indicated by a minus sign.) MIKOS INC. Statement of Cash Flows For the Year Ended December 31, 2018 Cash flows from operating activities: Net earnings $ 106,470 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization expense 37,600 Increase in accounts receivable Increase in inventory Decrease in prepaid expenses Decrease in accounts payable Increase in accrued liabilities (42,300) (14,300) 2,300 (23,300) 10,300 $ 76,770 Net cash flow from operating activities Cash flows from investing activities: Sale of land Purchase of equipment Sale of equipment 25,300 (166,300) 32,300 (108,700) Net cash flow used for investing activities Cash flows from financing activities: Payment of cash dividends Repayment of long-term note (56,670) (11,500) 113,000 44,830 12,900 Net cash flow from financing activities Net increase in cash and short-term investments Cash and short-term investments, beginning of year Cash and short-term investments, end of year $ 12,900
