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# Statement of Cash Flows: Indirect Method and Analysis

If I had to prepare a statement of cash flows? Indirect method, and perform

Analysis how would you go by doing this.
(A)
Alvin and Cory Jackson
Comparative Balance Sheets
December 31
Assets 2006 2005
Cash \$ 31,000 \$ 13,000
Accounts receivable 28,000 14,000
Merchandise inventory 25,000 35,000
Property, plant, and equipment 60,000 78,000
Accumulated depreciation (22,000) (24,000)
Total \$122,000 \$116,000

Liabilities and Stockholders' Equity
Accounts payable \$ 27,000 \$ 23,000
Income taxes payable 5,000 8,000
Bonds payable 27,000 35,000
Common stock 18,000 14,000
Retained earnings 45,000 36,000
Total \$122,000 \$116,000

Alvin and Cory Jackson COMPANY
Income Statement
For the Year Ended December 31, 2006
Sales \$220,000
Cost of goods sold 180,000
Gross profit 40,000
Selling expenses \$14,000

Income from operations 18,000
Interest expense 1,000
Income before income taxes 17,000
Income tax expense 4,000
Net income \$ 13,000

Dividends declared and paid were \$4,000.
During the year equipment was sold for \$8,500 cash. This equipment cost
\$18,000 originally and had a book value of \$8,500 at the time of sale.
All depreciation expense is in the selling expense category.
All sales and purchases are on account.
How do i:
Prepare a statement of cash flows using the indirect method. (a) Net
Cash provided by operating activities \$17,500
Compute free cash flow.

(B).
Prepare a statement of cash flows? Direct method, and perform analysis.
Data for Alvin and Cory Company are presented in A. Further analysis reveals the following.
Accounts payable pertain to merchandise suppliers.
All operating expenses except for depreciation were paid in cash.
How do I Prepare a statement of cash flows for Alvin and Cory Company using the direct method. (a) Cash receipts from customers \$206,000
Compute free cash flow.

#### Solution Summary

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\$2.19