Question

Preparing the statement of cash flows—indirect method

Accountants for Morganson, Inc. have assembled the following data for the year ended December 31, 2018:

2018 2017 Current Assets: Cash \( 99,400 \) 25,000 Accounts Receivable 64,100 69,700 Merchandise Inventory 83,000 75,000 Current Liabilities: Accounts Payable 57,600 55,200 Income Tax Payable 14,800 16,800

Transaction Data for 2018:

Issuance of common stock for cash \( 38,000

Payment of notes payable \) 46,100

Depreciation expense 24,000

Payment of cash dividends 50,000

Purchase of equipment with cash 74,000

Issuance of notes payable to borrow cash 62,000

Acquisition of land by issuing long-term notes payable 119,000

Gain on sale of building 4,500 Book value of building sold 54,000

Net income 68,500

Prepare Morganton'sstatement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.

Short answer

Answer

As per the cash flow statement, net change in the cash equals $74,400. And Total Non-cash Investing and financing activities equals $119,000

Step-by-step solution

Statement of cash flows using indirect method

Morganson Inc. Statement of Cash Flows For the year ended December 31, 2018
Cash Flows From Operating Activities:
Net Income	$68,500
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation expense	$24,000
Gain on sale of building	($4,500)
Decrease in account receivables	$5,600
Increase in merchandise inventory	($8,000)
Increase in account payable	$2,400
Decrease in tax payable	($2,000)
Net cash provided/ (used) in operating activities	$86,000
Cash Flows From Investing Activities:
Purchase of equipment	($74,000)
Sale of building	$58,500
Net cash provided/ (used) in investing activities	($15,500)
Cash Flows From Financing Activities:
Issuance of common stock	$38,000
Payment of notes payable	($46,100)
Issue of notes payable	$62,000
Dividend paid	($50,000)
Net cash provided/ (used) in financing activities	$3,900
Net increase/(Decrease) in cash	$74,400
Cash Balance, December 31, 2017	$25,000
Cash Balance, December 31, 2018	$99,400

Schedule of non-cash investing and financing activities

Morganson Inc. Statement of Cash Flows (Partial) For the year ended December 31, 2018
Non-cash Investing and financing activities
Acquisition of land by issuing long-term notes payable	$119,000
Total Non-cash Investing and financing activities	$119,000