Statement of Cash Flows—Indirect Method The comparative balance sheet of Harris Industries Inc.
at December 31, 20Y4 and 20Y3, is as follows:
Dec. 31, 20Y4 Dec. 31, 20Y3
Assets
Cash $443,240 $360,920
Accounts receivable (net) 665,280 592,200
Inventories 887,880 1,022,560
Prepaid expenses 31,640 25,200
Land 302,400 302,400
Buildings 1,713,600 1,134,000
Accumulated depreciation—buildings (466,200) (414,540)
Machinery and equipment 781,200 781,200
Accumulated depreciation— (214,200) (191,520)
machinery and equipment
Patents 106,960 112,000
Total assets $4,251,800 $3,724,420
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)$837,480 $927,080
Dividends payable 32,760 25,200
Salaries payable 78,960 87,080
Mortgage note payable, due in nine years 224,000 0
Bonds payable 0 390,000
Common stock, $5 par 200,400 50,400
Paid-in capital: Excess of issue price 366,000 126,000
over par—common stock
Retained earnings 2,512,200 2,118,660
Total liabilities and stockholders' equity $4,251,800 $3,724,420
An examination of the income statement and the accounting records revealed the following additional information applicable to 20Y4:
Net income, $524,580.
Depreciation expense reported on the income statement: buildings, $51,660; machinery and equipment, $22,680.
Patent amortization reported on the income statement, $5,040.
A building was constructed for $579,600.
A mortgage note for $224,000 was issued for cash.
30,000 shares of common stock were issued at $13 in exchange for the bonds payable.
Cash dividends declared, $131,040.
Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments

Statement of Cash Flows

Cash flow From Operating Activities

Net income                                                                        $524,580

Adjustment for Non Cash Items :

Depreciation expense - buildings                                      $51,660

Depreciation expense - machinery and equipment        $22,680

Patent amortization                                                              $5,040

Adjustments for Changes in Working Capital Items :

Increase in Accounts receivable                                      -$73,080

Decrease in Inventories                                                    $134,680

Increase in Prepaid expenses                                           -$6,400

Decrease in Accounts payable                                        -$89,600

Net Cash From Investing Activities                                 $569,540

Cash flow From Investing Activities

Buildings                                                                           -$579,600

Net Cash From Investing Activities                                 -$579,600

Cash flow From Financing Activities

Mortgage Note                                                                  $224,000

Dividends Paid                                                                  -$123,480

Net Cash From Financing Activities                                 $100,520

Movement during the year                                                  $82,320

Cash and Cash Equivalents at beginning of the year     $360,920

Cash and Cash Equivalents at end of the year                $443,240

Explanation:

For Determination of Dividends Paid, open a Dividends Paid Account as follows :

Debit:

Cash  (Balancing figure) 123,480

Balance c/d                       32,760

Totals                               156,240

Credit

Balance b/d                      25,200

Dividends Declared         131,040

Totals                               156,240