Michigan Auto Parts Company Uses the Indirect Method to Prepare

question 173

Essay

Michigan Auto Parts Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet:
$\begin{array}{c}\text { Michigan Auto Parts Company }\\\text { Comparative Balance Sheet}\\\text { December 31, 2018 and 2017}\\\begin{array}{llll}&2019 & 2018 & \text { Increase/(Decrease) }\\\text { Cash } & \$ 42,000 & \$ 36,000 & \$ 6,000 \\\text { Accounts Receivable } & 62,000 & 70,000 & (8,000) \\\text { Merchandise Inventory } & 106,000 & 50,000 & 56,000 \\\text { PP\&E, net } & \underline{240,000} & \underline{180,000} & \underline{60,000} \\\text { Total Assets } & \$ 450,000 & \$ 336,000 & \$ 114,000\end{array}\end{array}$ Additional information provided by the company includes the following:
Equipment costing $104,000 was purchased for cash.
Equipment with a net book value of $20,000 was sold for $28,000.
Depreciation expense of $24,000 was recorded during the year.
Prepare the investing activities section of the statement of cash flows.

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Definitions:

Product X

A placeholder name for any given product or service under consideration in an economic or marketing context.

Competitive Industry

A market scenario where there are many sellers, leading to competitive prices and innovations.

Economic Profits

The contrast between the sum of revenues and the sum of all costs, embracing both direct monetary and inferred expenditures.

Opportunity Cost

The worth of the best alternative given up as a consequence of a decision made.