Explore BrainMass

Direct and Indirect Methods for Financial Statements

Please see the atached document to review my work to see if I am on base with the assignment.

7. (SCF-Direct and Indirect Methods from Comparative Financial Statements) George
Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative statement of financial position and income statement for Winston as of May 31, 2005, are shown on the next page. The company is preparing its statement of cash flows.

The following is additional information concerning Winston's transactions during the
year ended May 31, 2005.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable
3. Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing
5,000 shares of stock.
4. The "other expenses" are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Winston issued 4,000 shares of common stock at
par value.
7. There were no penalties assessed for the retirement of bonds.
8. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.
a. Compare and contrast the direct method and the indirect method for reporting
cash flows from operating activities.
b. Prepare a statement of cash flows for Winston Company for the year ended May
31, 2005, using the direct method. Be sure to support the statement with
appropriate calculations. (A reconciliation of net income to net cash provided is
not required.)
c. Using the indirect method, calculate only the net cash flow from operating
activities for Winston Company for the year ended May 31, 2005.