Problem 2:

Instructions: Prepare a statement of cash flows using the indirect method.

The comparative balance sheet for the ZYX Company at December 31, 2019 and 2018 is as follows:

12/31/19 12/31/18

Assets:

Cash $146,600 $179,800

Accounts Receivable 224,600 242,000

Merchandise Inventory 321,600 299,200

Prepaid Expenses 13,400 9,600

Equipment 655,000 537,000

Accumulated depreciation-equipment (170,800) (132,200)

Total Assets $1,190,400 $1,135,400

Liabilities and Stockholders Equity

Accounts payable (merchandise creditors) $250,200 $237,600

Mortgage note payable 0 336,000

Common Stock, $10 par 74,000 24,000

Paid in Capital-common stock 470,000 320,000

Retained Earnings 396,200 217,800

Total Liabilities and Stockholders Equity $1,190,400 $1,135,400

Additional data obtained from an examination of the accounts in the ledger for 2019 are as follows:

1. Net Income, $332,000

2. Depreciation reported on the income statement, $83,400

3. Equipment was purchased at a cost of &162,800 and fully depreciated equipment costing $44,800 was discarded.

4. The mortgage note payable was not due until 2021 but the terms permitted earlier payment without penalty

5. 10,000 shares of common stock were issued at $20 for cash

6. Cash dividends declared and paid, $153,600