Presented below are the comparative December 31 financial statements for Martin Industries, Inc. (in $ Millions). Prepare a statement of cash flows for December 31, Year 2 using the indirect method

Martin Industries, Inc
Balance Sheets
At December 31, Year 2 and Year 1

Year 2
Year 1
Cash
$96,719
$28,694
Accounts Receivable
100,000
85,313
Inventory
206,250
181,250
Prepaid Insurance
1,875
2,500
Land, Buildings, and Equipment
1,562,500
1,406,250
Accumulated Depreciation
(762,500)
(715,000)
Investments
19,375
106,250
Total Assets
$1,224,219
$1,095,256

Accounts Payable
$95,425
$185,838
Salaries Payable
25,000
30,625
Notes Payable
31,250
93,750
Bonds Payable
250,000
-
Common Stock
375,000
375,000
Retained Earnings
447,544
410,044

$1,224,219
$1,095,256



Additional information for Year 2
(1) Sold available for sale securities costing $86,875 for $92,500.
(2) Equipment costing $25,000 with a book value of $6,250 was sold for $7,500.
(3) Issued 8% bonds at face value for $250,000.
(4) Purchased new equipment for $181,250 and paid cash.
(5) Paid cash dividends of $25,000.
(6) Net income was $62,500.

What will be an ideal response?

Answer:
Martin Industries, Inc
Statement of Cash Flows
For the Year Ended December 31, Year 2

Cash flows from operating activities

Net income
$62,500

Adjustments for non-cash revenues and expenses

Depreciation expense
66,250

Gain on sale of investments
(5,625)

Gain on sale of equipment
(1,250)

Adjustments for changes in working capital

Increase in accounts receivable
(14,687)

Increase in inventory
(25,000)

Decrease in prepaid insurance
625

Decrease in accounts payable
(90,413)

Decrease in salaries payable
(5,625)

Net cash flows from operating activities

(13,225)

Cash flows from investing activities

Sale of available for sale securities
92,500

Sale of equipment
7,500

Purchase of equipment
(181,250)

Net cash flows from investing activities

(81,250)

Cash flows from financing activities

Sale of bonds payable
250,000

Payment of notes payable
(62,500)

Payment of cash dividends
(25,000)

Net cash flows from financing activities

162,500

Net increase in cash

68,025
Cash Balance, January 1

28,694
Cash Balance, December 31

96,719