Marquette Décor is a merchandiser that operates a small retail store.Comparative balance sheets for the years ending December 31, 2018 and 2017 and its income statement for 2018 follow: \(\begin{array}{lrr}&\text { December } 31\\text { Assets }&2018&2017\
\hline \text { Cash } & \$ 35,400 & \$ 45,300 \
\text { Accounts receivable } & 11,400 & 14,500 \
\text { Merchandise inventories } & 36,500 & 34,100 \
\text { Equipment } & 90,000 & 66,000 \
\text { Accumulated depreciation } & \underline{(28,600)} & (31,400) \
\text { Total assets } & \$ 144,700 & \$ 128,500\\
\text { Liabilities and Stockholders' Equity }\\hline
\text { Accounts payable } & \$ 14,300 & \$ 12,500 \
\text { Income taxes payable } & 4,500 & 8,800 \
\text { Long-term notes payable } & 16,500 & 23,000 \
\text { Common stock, } \$ 2 \text { par } & 88,200 & 65,300 \
\text { Retained earnings } & 21,200 & 18,900 \
\text { Total liabilities and stockholders' equity } & \$ 144,700 & \$ 128,500 \\\text { Sales } & \$ 224,000 \
\text { Cost of goods sold } & 123,000 \
\text { Depreciation expense } & 14,000 \
\text { Other expenses } & 56,000 \
\text { Gain on sale of equipment } & 3,400 \
\text { Income taxes } & 16,000 \
\text { Net income } & \$ 18,400
\end{array}\) During the year, equipment with an original cost of $17,000, and accumulated depreciation totaling $16,800 was sold for $3,600.Dividends were declared and paid during the year.How much cash was provided/(used) by financing activities in 2018?

Question

Marquette Décor is a merchandiser that operates a small retail store.Comparative balance sheets for the years ending December 31, 2018 and 2017 and its income statement for 2018 follow: \(\begin{array}{lrr}&\text { December } 31\\text { Assets }&2018&2017\
\hline \text { Cash } & \$ 35,400 & \$ 45,300 \
\text { Accounts receivable } & 11,400 & 14,500 \
\text { Merchandise inventories } & 36,500 & 34,100 \
\text { Equipment } & 90,000 & 66,000 \
\text { Accumulated depreciation } & \underline{(28,600)} & (31,400) \
\text { Total assets } & \$ 144,700 & \$ 128,500\\
\text { Liabilities and Stockholders' Equity }\\hline 
\text { Accounts payable } & \$ 14,300 & \$ 12,500 \
\text { Income taxes payable } & 4,500 & 8,800 \
\text { Long-term notes payable } & 16,500 & 23,000 \
\text { Common stock, } \$ 2 \text { par } & 88,200 & 65,300 \
\text { Retained earnings } & 21,200 & 18,900 \
 \text { Total liabilities and stockholders' equity } & \$ 144,700 & \$ 128,500 \\\text { Sales } & \$ 224,000 \
\text { Cost of goods sold } & 123,000 \
\text { Depreciation expense } & 14,000 \
\text { Other expenses } & 56,000 \
\text { Gain on sale of equipment } & 3,400 \
\text { Income taxes } & 16,000 \
\text { Net income } & \$ 18,400
\end{array}\) During the year, equipment with an original cost of $17,000, and accumulated depreciation totaling $16,800 was sold for $3,600.Dividends were declared and paid during the year.How much cash was provided/(used) by financing activities in 2018?

Quizplus · Accepted Answer

Financing activities include transactions involving debt, equity, and dividends. Here, we calculate cash provided/(used) by financing activities by looking at changes in long-term notes payable, common stock, and dividends paid. 1. **Long-term notes payable** decreased by $23,000 - $16,500 = $6,500, indicating cash was used to reduce debt.2. **Common stock** increased by $88,200 - $65,300 = $22,900, indicating cash was provided by issuing more stock.3. **Dividends** can be calculated indirectly. Given that net income was $18,400 and retained earnings increased by $21,200 - $18,900 = $2,300, it implies dividends paid were $18,400 - $2,300 = $16,100.However, the dividends calculation seems to be unnecessary for determining cash flow from financing activities directly from the given data. The direct cash flow effects are from long-term notes payable and common stock changes.So, the net cash provided by financing activities is:- $6,500 (used to reduce debt) + $22,900 (from issuing stock) = $16,400 provided by financing activities.The correct calculation should focus on the explicit changes in financing-related accounts:- Cash used to reduce long-term notes payable: $6,500 used.- Cash provided by issuing common stock: $22,900 provided.Thus, the net cash provided by financing activities is $22,900 - $6,500 = $16,400. However, considering the options provided and the apparent confusion, the correct approach to match the options given would involve re-evaluating the calculation based on the explicit changes in the financing accounts provided. Given the discrepancy in the explanation and the options provided, it appears there was a mistake in the calculation process described. The correct focus should be on the net changes in the financing accounts without considering dividends directly, as dividends are not explicitly accounted for in the options given. The correct answer should reflect the net changes in financing activities based on the information provided about long-term notes payable and common stock.

Marquette Décor Is a Merchandiser That Operates a Small Retail