Problem 1:

Instructions:

Prepare a statement of cash flows using the indirect method.

The Comparative Balance Sheet of XYZ Inc. for December 31, 2019 and 2018 is shown as follows:

12/31/19 12/31/18

Assets

Cash $625,760 $585,920

Accounts Receivable 227,840 208,960

Inventories $641,760 $617,120

Investments 0 240,000

Land 328,000 0

Equipment 705,120 553,120

Accumulated Depreciation-equipment (166,400) (148,000)

Total Assets $2,362,080 $2,057,120

Liabilities and Stockholders Equity

Accounts payable (merchandise creditors) $424,480 $404,960

Accrued expenses payable (operating expenses) 42,240 52,640

Dividends payable 24,000 19,200

Common Stock, $4 par 150,000 100,000

Paid In Capital common stock 417,500 280,000

Retained earnings 1,303,860 1,200,320

Total Liabilities and Stockholders equity 2,362,080 2,057,120

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

1. The Investments were sold for $280,000 cash.

2. Equipment and land were acquired for cash

3. The common stock was issued for cash

4. There was a $199,540 credit to Retained Earnings for net income

5. There was a $96,000 debit to Retained Earnings for cash dividends declared