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Direct and Indirect Cash Flow Statements

A) Prepare a statement of cash flow using the indirect method, including all required disclosures.
b) Prepare a "cash provided by (or used in) operating activities" section under the direct method.
c) Comment on the company's cash flow activities during the year.

See the attached EXCEL file for all of the figures and appropriate information.

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Direct Method - Statement of Cash Flows

Cash flow from Operating activities
Income before taxes $112,000
Bad debt expense $2,000
Loss on sale of equipment $3,000
Gain on sale of investments (AFS) $(15,000)
Deprecaition and amortization $20,000 $10,000
Cash flow before working capital changes $122,000
Working capital changes:
Increase in accounts receivable $(17,500)
Increase in merchandise inventory $(14,000)
Reduction in accrued pension liability $(2,500)
Increase in accounts payable $12,500 $(21,500)
Income taxes paid $(38,500)
Cash flow from Operating activities $62,000

Cash flow from Investing activities
Sale of investments $52,000
Proceeds from sale of equipment $3,000
Purchase of equipment $(32,000)
Cash flow from Investing activities $23,000

Cash flow from Financing activities
Issue of shares $35,000
Repayment of long term notes $(8,000)
Dividends paid $(74,000)
Change in other comprehensive income $(9,000)
Cash flow from ...

Solution Summary

The direct and indirect cash flow statements are examined.