Question
The following is Aerie Corp.'s comparative balance sheet accounts worksheet at December 31, Year 8 and Year 7, with a column showing the increase (decrease)
The following is Aerie Corp.'s comparative balance sheet accounts worksheet at December 31, Year 8 and Year 7, with a column showing the increase (decrease) from Year 7 to Year 8.
| Comparative balance sheet worksheet | Year 8 | Year 7 | Net Change |
| Cash | $ 800,000 | $ 700,000 | $100,000 |
| Accounts receivable | 1,128,000 | 1,168,000 | (40,000) |
| Inventories | 1,850,000 | 1,715,000 | 135,000 |
| Property, plant, and equipment | 3,307,000 | 2,967,000 | 340,000 |
| Accumulated depreciation | (1,165,000) | (1,040,000) | (125,000) |
| Investment in Acme, Inc., at equity | 305,000 | 275,000 | 30,000 |
| Loan receivable | 270,000 | 0 | 270,000 |
| Total assets | $6,495,000 | $5,785,000 | $710,000 |
| Accounts payable | $1,015,000 | $955,000 | $60,000 |
| Income taxes payable | 30,000 | 50,000 | (20,000) |
| Dividends payable | 80,000 | 90,000 | (10,000) |
| Capital lease obligation | 400,000 | 0 | 400,000 |
| Capital stock, common, $1 par | 500,000 | 500,000 | 0 |
| Additional paid-in capital | 1,500,000 | 1,500,000 | 0 |
| Retained earnings | 2,970,000 | 2,690,000 | 280,000 |
| Total liabilities and shareholders' equity | $6,495,000 | $5,785,000 | $710,000 |
Additional information:
On December 31, Year 7, Aerie acquired 25% of Acme's common stock for $275,000. There is no goodwill attributable to the investment, which is appropriately accounted for by the equity method. Acme reported income of $120,000 for the year ended December 31, Year 8. No dividend was paid on Acme's common stock during the year.
During Year 8, Aerie loaned $300,000 to Sky Co., an unrelated company. Sky made the first semi-annual principal payment of $30,000 on October 1, Year 8.
On January 2, Year 8, Aerie sold equipment costing $60,000, with a carrying amount of $35,000, for $40,000 cash.
On December 31, Year 8, Aerie entered into a capital lease for an office building. The present value of the annual rental payments is $400,000, which equals the fair value of the building. Aerie made the first rental payment of $60,000 when due on January 2, Year 9.
Net income for Year 8 was $360,000.
Aerie declared and paid cash dividends for both Year 7 and Year 8. For Year 7, Aerie declared a $90,000 dividend and paid it on February 28, Year 8. For Year 8, Aerie declared an $80,000 dividend to be paid on February 8, Year 9.
Using the indirect method, complete Aerie's statement of cash flows for the year ended December 31, Year 8, using the information above. Enter the appropriate amounts in the designated cells below. Indicate negative numbers by using a leading minus (-) sign.
Aerie Corp. Statement of Cash Flows For the year ended December 31, Year 8
| Cash flows from operating activities: | ||
| Net income | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation expense | ||
| Gain on sale of equipment | ||
| Equity in income of Acme, Inc. | ||
| Change in accounts receivable | ||
| Change in inventories | ||
| Change in accounts payable | ||
| Change in income taxes payable | ||
| Net cash provided by operating activities | ||
| Cash flows from investing activities: | ||
| Proceeds from equipment sale | ||
| Loan to Sky Co. | ||
| Proceeds from principal payment on loan receivable | ||
| Net cash used in investing activities | ||
| Cash flows from financing activities: | ||
| Dividends paid | ||
| Net cash used in financing activities | ||
| Net increase in cash | ||
| Beginning balance | ||
| Ending balance |
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