Question

The following information is available for Mergenthaler Corporation for the year ended December 31, 2022:

Collection of principal on long-term loan to a supplier $16,000
Acquisition of equipment for cash 10,000
Proceeds from the sale of long-term investment at book value 22,000
Issuance of common stock for cash 20,000
Depreciation expense 25,000
Redemption of bonds payable at carrying (book) value 34,000
Payment of cash dividends 6,000
Net income 30,000
Purchase of land by issuing bonds payable 40,000

In addition, the following information is available from the comparative balance sheet for Mergenthaler at the end of 2022 and 2021:

2021 2022
Cash $148,000 $91,000
Accounts receivable (net) 25,000 15,000
Prepaid insurance 19,000 13,000
Total current assets $192,000 $119,000
Accounts payable $30,000 $19,000
Salaries and wages payable 6,000 7,000
Total current liabilities $36,000 $26,000

Required:
Prepare Mergenthaler's statement of cash flows for the year ended December 31, 2014, using the indirect method.

Answer 1

Cash Flow from Operating Activities Amount$

Net Income 30000

Add Depreciation Expense 25000

Increase in Accounts Payable 11000

Increase in Accounts Receivables -10000

Increase in Prepaid Insurance -6000

Decrease in Salaries and Wages Payable -1000

Net Cash Flow from Operating Activities A 49000

Cash Flow from Investing Activities

Acquisition of Equipment for Cash -10000

Proceeds from Sale of Long-Term Investment 22000

Net Cash Flow from Investing Activities B 12000

Cash Flow from Financing Activities

Redemption of Bonds Payable -34000

Proceeds from Issuance of Common Stock 20000

Payment of Cash Dividends -6000

Collection of Principal on Long-Term Loan 16000

Net Cash Used in Financing Activities C -4000

Opening Cash Balance 91000

Add Increase in Cash (A+B+C) 57000

Closing Cash Balance 148000